INSTRUCTION BOOK 



...... (Ajice Mof^ii 

NEV/-YORK 



LIBRARY OF CONGRESS. 

Shelf...W':4.2. 



UNITE© STATES OF AMERICA. 



AN 



INSTRUCTION BOOK 



LIFE INSURANCE AGENTS 



CMYASSERS AND SOLICITORS. 



By N. WILLEY, Actuabt. 



( 



\6^. 









v^ 



C. C. HlNE, 

UrriCBB OF THE Insurance Monitor aud the Insurance Law Jottmal, 
NEW YORK. 
1891. 






Copyright by C. C. Hinb. 



CONTENTS. 



CHAPTER I. 
General Idea of Life Insurance. 

PAGK 

Insurance «*% a criterion of progress 11 

Liftt Insuruace based upon tlie law of average liuman mor- 

taUty 12 

Life Insurance illustrated by Mr. Wright as a bet 12 

Life Insurance a plain business transaction 13 

Life Insurance not a charity but a duty 14 

Money value of human life 15 

Magnitude of the business 16 

Life Insurance rests on solid foundations— capital, legal re- 
strictions, publicity, public confidence 17 



CHAPTER IL 

Life Insurance Explained by Diagrams. 

Insuiance for one year 2C 

Increasing risks 21 

Teria insurance 22 

Wnole life insurance 22 

Single payment lile 24 

Limited payment life 25 

Amount at risk 25 

Simple eudowm ent insurance 26 

Endowment insurance 27 

Practical suggestions 28 

CHAPTER III!' 

The Application and Policy. 

The appUcatlou, description of 30 

How it should be fiUed out 31 

The policy, description of 32 

Different kinds of policies 32 

Whole life 32 

Limited payment life 33 



iv CONTENTS. 

CHAPTER IV. 
Habits and Qualifications of a Good Agent. 

PAGE 

Different kinds of policies 32 

Term, or temporary b4 

Simple endowment 35 

Endowment insurance 35 

Annuities 36 

Payment ol' premiums and days of grace 37 

Semi-auuual and quarterly premiums b7 

Changes of policies 37 

Motives for accepting an agency 39 

Respect for his calling 3y 

Appearance and manner 40 

Tact 41 

Social qualities 41 

Cheerfulness 42 

Good temper 43 

Perseverance 43 

Enthusiasm 44 

Honesty in soliciting 44 

Consequences of misrepresentation 46 

Some companies insist on the truth being told 47 

Character in an agent 48 

CHAPTER V. 
Information Needed by the Agent. 

Should know what insurance is 6U 

Adaptation of different plans 51 

New plans and features 52 

Agent must instruct the public 53 

Should read insurance books and papers 53 

Need not be an actuary 54 

Should understand interest and discount 55 

Well posted about his own company 55 

Knowledge ol human nature , „ . . 56 

CHAPTER VI. 
What to Avoid. 

Too much talking. 58 

Dsnouncing other companies 59 

Advising unprofitable plans .... 61 

Odd forms of insurance 61 

Extravagant statements 62 

Newspaper criticisms 63 

Assessment insurance 63 

Unnecessary expenditures 64 

Brokerage 65 

Rebate 65 

Intemperate men as risks 66 

Improper use of leaflets, etc 66 



CHAPTER VIL 
Choosing a Company. 

PAGE 

Aee or size Of a company 68 

Mutualj mixed and stock companies 69 

Character and standing of the oflQ.cers 70 

New plans of insurance , 71 

Different methods of paying the premiums 71 

Different methods of returning the surplus 71 

Different privileges and restrictions 71 

Method of doing business 72 

Reputation of the company among its policy-holders 73 

Past history of the company 73 

Agents should work only for good companies 73 



CHAPTER Vm. 
The Company. 

The President and Vice President 75 

The Secretary 76 

The Medical Examiner 76 

The manager of agencies 77 

Devotion to the company 78 

Influence of agents on a company's reputation 78 

Contracts with the company 79 

Commuted commissions 79 



CHAPTER IX. 
The Agency. 

The field 81 

Office headquarters 82 

Making a specialty of insuring certain classes 82 

Agent should build on a solid foundation 82 

Securing the influence of prominent men 83 

Minister of a parish 81 

Owners of factories, etc 84 

Influence of the medical examiner 84 

Other events 85 

Advertising 85 

How to make an agency pay 86 

Should endeavor to excel all other agencies 86 

The reward of a successful agent 87 



CHAPTER X. 
Accounts with the Company. 



Monthly statements . 
Office books, etc . . . . 
Careless agents 



vi CONTENTS. 

CHAPTEU XI. 
Soliciting. 

PAGE 

No uniform rules can be given 90 

Introductions 91 

A suitable opportunity 92 

Stating the business 92 

Arguments should be adapted to the condition of the person 

solicited 93 

Prepared to meet the objections 94 

Religious scruples 95 

Is life insurance a safe investment ? 96 

Eich enough ah'eady ... 97 

In debt 97 

The money is needed for business purposes 97 

The money spent for insurance is lost 98 

No one dependent on him 98 

Some other time wiU do as well 98 

The policy may lapse 99 

Reasons for insuring 99 

Life is uncertain , 99 

Unwise to defer 100 

Life insurance adds to the length of one's hfe 100 

Every man can leave his family free from want lUO 

Immediate provision for the fainily in case of death 101 

Views of Hon. Elizur Wright 101 

Provision agaiust old age 102 

Money value of a pohcy 102 

A safe investment 103 

Examples of our best financiers , 103 

One plan of insurance 103 

Filling up the application 104 

Medical examinations 104 

Delivering the policy 105 

Semi-annual and quarterly premiums 105 

" Not-taken " premiums 106 

•SmaU policies 106 

Habits and occupation of parties seeking insurance 107 

Remarks of Dr. AUen 108 

CHAPTER XII. 
The Policy-holder. 

The agent's friend and assistant 109 

Policies should not be allowed to lapse 109 

Over-insurance a cause of lapses Ill 

Settlement of claims Ill 

CHAPTER Xin. 

Surrender Values and Paid-up Policies- 

Surrender values a source of dissatisfaction among policy- 
holders 113 



CONTENTS. Mil 

Actwal and tabular cost of insurance . 114 

Net values and surrender values 115 

What is a policy? 115 

Payment of surrender values now generally adopted 116 

\rbij companies caunot pay the whole of the reserve as th e 

surrender value 118 

Practical iUusti ations 119 

Why companies cannot pay a surrender value at the end of 

the first year 121 

Dlub-trations 121 

Effect of premium notes and loans on surrenders 123 

Ten payment, lile and endowment policies 123 

Illustrations 124 

Paid-up policies 127 

Little gained by lapsed policies 128 



CHAPTER XIV. 

Distribution of Surplus- 

The premiimis '. 130 

Mortality 130 

Interest 131 

Margin, or loading 131 

Period of distribution 132 

Methods of distribution 133 

Percentage on premiums 133 

Percentage on reserved 134 

("outribution plan 134 

Its first application, by whom 134 

Cost of insurance explained 134 

Cost of insurance, table of 135 

Illustration of contribution plan 135 

Application of surplus 137 

Reduction of next premium 137 

Eeversionary insurance 137 

Purchase of term insurance 137 

Purchase of term insurance, tables of 138 

Advantages and defects of difierent methods of applying the 

surplus J 38 

Tontine dividend insurance explained 13y 

A triple bet 140 

Table illustrating accumulation of dividends 142 

Explanation of the table 143 

Advantages and disadvantages 141 

Savings bank insurance 145 

• Table illustrating, by Mr. Wright 146 



CHAPTER XV. 

The Law of Life Insurance. 

Powers of coi-poi'adons 148 

Powers and duties of agents 149 

Agent's relation with the company 151 

Insurance brokers 152 

The law of contracts 153 



viii CONTENTS. 

PAGM 

Life insurance not an indemnity 156 

Payment of premiums 157 

Delivery of policy ]58 

Warranty and representation 158 

Insurable interest 160 

Waiver 161 

Assignment 162 

Prospectus 163 

Policy-holder not heard from 164 

Violation of conditions 164 

Rights of married women 165 

Suicide 166 

Appendix— Tables of premium rates of companies..... ,,170-173 




EDITOR'S PREFACE, 

The years that have elapsed since this work was 
originally prepared by the author have witnessed a 
marked development in life insurance as a business and 
some important changes in its legal and social re- 
lations. It is inevitable that a book presenting the 
subject as it then was, should contain some statements 
which are now either antiquated, or inaccurate. But 
the principles, practice, and law of Hfe insurance as a 
whole are in the main substantially to-day wnat they 
then were. The standard character of this work sug- 
gests the impropriety of any unnecessary alterations, 
and the effort of the present editor has been 
to preserve the text in all respects unaltered 
except where changes were needed to adapt it 
to the present condition of the business. Plans which 
were formerly popular, have in some cases been 
abandoned for others, and legal questions formerly 
doubtful have since been decisively answered. It is 
in these matters that the principal modifications have 
been made. The tables appended to the present 
edition showing the premium rates of the companies, 
will be found a valuable addition by the agent. 

Walter S. Nichols. 



INTRODUCTION. 



This manual is prepared for the purpose of educat- 
ing life insurance agents to a higher appreciation of 
their duties and responsibilities, and to give them some 
practical information which will enable them not only 
to be more successful in obtaining new business, but 
also in winning the respect and confidence of the pub- 
lic. The duties and responsibilities of agents have 
hitherto been almost wholly confined to the task of get- 
ting new business. Too many have gone into the field 
with no other motive or aim than to reap a harvest of 
first commissions, without caring whether the best in- 
terests of policy-holders were consulted ; too many 
officers of life companies have made the number and 
amount of new applications the only criterion of excel- 
lence in an agent ; too many applications have been 
written in a careless or perhaps designedly incorrect 
manner ; and when a policy based upon such represen- 
tations has become a claim, the payment has often been 
resisted on account of the ignorance and irregularity of 
the agent. In these instances the officers of compa- 
nies have been equally responsible ; they have acted as 
if new applications, like a mantle of charit}', covered a 
multitude of sins. But the loss of insurance during the 
past few years, equal to seventy or eighty per cent, of 
the new business, in lapses, surrenders, and not taken 
policies, ought to suggest the importance of reform. 
When it takes place, honor and truthfulness will be the 
first requisites of a solicitor. 

Most agents need some practical hints about theit- 
business to enable them to succeed. Life insurance 
lias become a science which few thoroughly under- 
stand, but all should be tolerably familiar with its lead- 
ing principles. It appears to be a practical absurdity 
for a man to commence soliciting, knowing nothing of 
the difi'erent plans of insurance, the effect of different 
premium rates, or of the relative advantages of the pe- 
culiar features of the different companies ; or to at- 
tempt to build up a business where the details and mi- 
nutiae are all to be learned. It is a waste of time and 
patience for an agent to persuade people to appreciate 
the benefits of life insurance when its principal advan- 



10 INSTRUCTION BOOK. 

tages and characteristics are unknown to him. and it is 
still more difficult to compete with other agents who 
have made this subject a special study. The young at- 
torney has spent months, and perhaps years, in learn- 
ing the routine of a lawyer's office, in attending courts 
and attaining a practical knowledge of his profession ; 
the young doctor has spent his time in hospitals, dis- 
secting-rooms, and in the office of a practicing physi- 
cian till he has obtained the knowledge and experience 
which will enable him to succeed. In every kind of 
business its general principles and practical operation 
must be learned before one can hope to meet with suc- 
cess. Eventually it will be so regarded in life insur- 
ance. A class of men will be carefully trained to the 
business, and while they devote their lives to this call- 
ing, they will make themselves . so familiar with the 
science that they can advocate it successfully without 
having recourse to deception or without fear of mis- 
take. 

The agent must first be educated in this manner in 
order to be properly appreciated and trusted by the 
public. An ignorant agent making preposterous state- 
ments about the infinite results of a series of finite pre- 
miums, and the working of particular plans, may suc- 
ceed for a time, but his prosperity will be an epher- 
meral one. Ere long the policy-holders will find that 
they have been deceived, his expec ted success is not 
realized, and lapses, forfeitures and surrender values 
will be the results. JBut when life insurance is proper- 
ly explained, and its truths are clearly unfolded, how 
beautiful the harmony of the mathematical principles 
involved ! how convincing the duty to insure ! how easy 
to see where the greatest advantage hes ! and how sat- 
isfactory to know that the agent consults the in t( rests 
of the policy-holder as well as his own ! 

The principal requisite to success in any business is 
a general love for it. Unless an agents feels an enthu- 
siasm in his work, unless he believes he is conferring a 
great advantage on the insured by his efibrts, unless he 
goes forth in the anxious pride of one who means to 
win, then he has mistaken his calling. But he cannot 
be heartily in love with in till he understands it — till he 
is familiar with all the arguments which can be used 
for and against it, and until he is able to instruct those 
he wishes to convince. In soliciting, "knowledge i? 
power " and the agent who thoroughly knows what his 
duties are, and how to perform them acceptably, will be 
the most enthusiastic and the most successful. 



CHAPTEE I. 

GENERAL IDEA OF LIFE INSURANCE. 
Insurance a Criterion of Progress. 

JNSUBANCE of all kinds is a uatmal result of modern 
civilization. It is based iipon two well-known facts ; 
that we are exposed to ^ the occurrence of certain mis- 
fortunes, such as having our buildings burned, our ships 
lost by storms, and our lives destroyed ; and secondly, 
that these misfortunes happen with considerable regu- 
larity in classes containing a large number of members. 
The insurance consists in the unfortunate members of 
these classes being recompensed for their losses by the 
cojitributions or premiums of others who are fortunate 
enough to escape a similar calamity. Hitherto man- 
kind has not succeeded in preventing these occurrences. 
Fires will break out and reduce valuable buildings to 
ashes. Ships will be wrecked notwithstanding all dis- 
coveries in meteorology. People will die from accident 
and disease before they have fulfilled their allotted three 
score years and ten, in spite of all discoveries in medi- 
cine or hj'-giene. These things happen every day, and 
the only way to make good the losses which they entail 
is for a large number of people exposed to any kind of 
disaster to combine together, and for those who escape 
to join in paying a definite amount of the loss to those 
who suffer. 

To discover the laws which govern the occurrence of 
these disasters, requires an amount of labor in collect- 
ing statistics, science in reducing them to nearly uni- 
form p::inciples, and public confidence in binding the 
policy-holders together, which is found only in highly 
civilized countries. The ancients knew nothing of in- 
surance ; half civilized nations do not practice it ; they 
have not made sufficient intellectual advancement to 
enable them to collate the facts and master the princi- 
ples necessary to reduce insurance to a scientific basis. 
Only the most enlightened nations insure to any great 
extent. 

Insurance, then, may be regarded as a criterion of mo- 
dern progress, and life insurance as an example of its 
highest development. No other kind of insurance is 
based upon such exact laws or requires such profound 



12 INSTRUCTION BOOK. 

mathematical principles for its complete investigatiou, 
and none other is so important to a community, so lit- 
tle, understood, or BO universally neglected. 

Life Insurance based upon the Law of Average 
Human Mortality. 

The law which lies at the basis of all computations in 
life insurance is, that, in a large class of individuals of a 
certain age, we can predict with considerable certainty 
how many will die within a definite period of time. We 
cannot tell whether any particular individual will live 
or die during any future period, but a large number of 
persons, taken at any given age, loses its members in 
such regular order that we are compelled to acknow- 
ledge that there is a law of human mortality to which 
the facts in every-day life conform to a remarkable de- 
gree. If a person puts 1,000 white beans in a bag, and 
then adds 100 black ones, and, after the bag is fairly 
shaken, a blindfolded man proceeds to draw them out 
one by one, it will be found that in drawing a limited 
number, the probability that he will draw a white beau 
is just ten times as great as that he will draw a black 
one. This is an illustration of the principle upon which 
all tables of mortality are based. Mr. Elizur Wright 
illustrates the contract of life insurance by calling it a 
bet — unfortunately, so far as nomenclature is concerned, 
because betting is intimately associated with gambling, 
whereas there is nothing essentially like gambUng in 
insurance. A man aged 25 "bets" $20 that he will 
die mthin a year, and he makes a still further bargain 
that he shall have the privilege of renewing this "bet" 
once a year during life. The company " bets" that he 
man will not die, and stakes $1,000 on the result. The 
company has a table of mortality prepared, which 
shows how many will probably die out of a thousand 
for each successive year of age from 10 years to 95 or 
100, and having converted this average annual risk into 
a uniform rate through life, and added a margin for ex- 
penses and contingencies, it is ready to bet $1,000 
against a premium of $20 that he will not die. The 
pohcy-holder puts up his $20 per annum, and the 
longer he lives the more likely he is to win. The com- 
pany will lose the " bet" in the end ; but if it obtains 
premiums and interest thereon enough in the mean- 
time to recompense it for the sum insured, and losses 
paid on others of the same age, it is the gainer. The 
same principle holds good in fire insurance. A man 
"bets" a certain sum— say one per cent, or $w»— tuat 



FOR LIFE AGENTS. 13 



his house, valued at $5,000, will be consumed, eind the 
company "bets" $5,000 that it will not. Now sup- 
pose that there are several thousand people making just 
such "bets." In so large a class, a company can easily 
, find out what is the average ratio of loss, and how high 
the premium will have to be made to bear it and pay 
all working expenses. 

Life Insurance a Plain Business Transaction. 

When we reduce life insurance to its elementary prin- 
ciples, we find that it is a plain business matter. The 
idea that it is a benevolent, charitable or sacred institu- 
tion, the protector of the widow and orphan, is an error 
which has been cherished altogether too long. There 
is no more benevolence or charity in it than there is in 
a savings bank which pays its depositors when they de- 
mand their deposits. Nor is there auy more benevo- 
lence or charity in a man's insuring his life for the ben- 
efit of his family than there is in his providing them 
with food and raiment. It is his duty to provide for 
them as well as he knows how, and if he is convinced 
that life insurance is one of the means whereby this 
can be accomplished, then he is unfaithful to his trust 
if he does not take advantage of it. Nor is a life insur- 
ance company a benevolent or charitable corporation 
because it pays its losses promptly. Paying losses is a 
part of the contract of insurance, as paying for goods 
purchased is a part of the duties of mercantile life. It 
may be considered a heresy to expose a fallacy on which 
so many solicitors have depended for their arguments, 
and on which so much has been written in favor of life 
insurance ; but this is the simple truth, and the sooner 
it is generally understood the better. life insurance 
has depended too much for its success upon sympathy, 
misrepresentation and mystery, which is the cause of so 
much dissatisfaction and disappointment among policy- 
holders. 

Since life insurance companies are purely business 
organizations, they must be conducted on sound busi- 
ness principles. In order to live and prosper, they 
should protect themselves, or rather their policy-hold- 
ers, against fraudulent claims, extravagance, and every- 
thing which hinders their successful operation. A 
company which does not is unworthy of confidence and 
patronage, and so when the public or 8ome ignorant ed- 
itor blames a life insura'^^e company for contesting a 
claim which is evidently fraudulent, or for refusing to 
defraud the remaining policy-holders by paying too lib- 



14 INSmUCTIOI^ BOOK 

eral surrender values, he is discussing matters which he 
does not understand. The corupany is designed to be- 
nefit those policies which remain in force in preference 
to those which drop out, and honest policy-holders in- 
stead of derelicts. ^ 

Life Insurance not a Charity, but a Duty. 

But although life insurance is strictly a business mat- 
ter on the part of the company, it has a grand and no- 
ble mission to perform. On the part of the policy- 
holder it appeals to the noblest and tenderest feelings 
of his nature. The care of those dependent upon him ; 
the protection of offspring ; the careful preparation for 
the support of loved ones, years after the graves shall 
have covered the strong arm which labors and the man- 
ly heart which sympathizes with them — this is the 
great mission of life insurance, and to this end should 
all its energies be directed. It is not a legitimate sub- 
ject of speculation. If men insure their lives to make 
money on the investment, it is because they know that 
they are" short-lived, or because they have erroneous 
views on the subject of profits. If they know that 
they are short-lived, and get into a company by making 
deceptive representations, they intend to defraud the 
remaining policy-holders. If they insure as an invest- 
ment, and live to a good old age, they obtain a moder- 
ate interest on their money, less the tabular cost of in- 
surance. 

But passing over these baser motives, there is much 
real solid good done by insurance. It tends to lengthen 
a man's hfe by giving him that assu-rance in the hour 
of sickness that his family is provided for in the event 
of his death ; it inculcates habits of economy and self- 
denial by compelling him to set aside a part of his in- 
come to purchase a future benefit ; it discourages in- 
temperance as one of the means by which a policy may 
be lost, and by placing the policy-holder under bonds not 
to die by intoxication ; and finally, its whole tendency 
is to furnish him with the noblest impulses of action, 
which any mere business or selfish motive can bestow. 

There is no charity, no benevolence in this. None ol 
the saintly virtues which some writers love to proclaim 
in advocating life insurance ; but there is an honest 
performance of duty ; there is a preparation for death 
as far as worldly matters are concerned, and there is 
the exercise of that forethought which distinguishes a 
civilized man from a savage, or prudence from reckless- 
ness. The man who is insured in a sound and pros- 



FOB LIFE AGENTS. 15 

perous conipauy has the feeling of security for the wel- 
fare of his family in case of sudden death, and this may 
be a boon whose value cannot be estimated in dollars 
and cents. 

There is many a man who would hardly rest a single 
night if his factory, warehouse or store were not in- 
sured to its full value ; but who will recklessly expose 
himself to death while his affairs are in a chaotic con- 
dition, with no certain provision for his family— no in- 
surance on his life. Men do not refuse to pay money 
for other objects of a similar nature. We live in a civ- 
ilized country where there are laws, civil of&cers, courts 
and policemen. We can sleep, knowing that there are 
watchmen to protect our property from being stolen or 
destroyed. We can travel by day and night, knowing 
that the arm of the law will protect us, and for these 
blessings we cheerfully pay taxes ; but in all this there 
is no insurance, only an imperfect protection. We in- 
sure our buildings against fire, when not one building 
in a hundred burns, and we pay our fire insurance pre- 
miums promptly and cheerfully; and sometimes, after a 
great deal of argument and solicitation, and too often 
with an idea that it is a good speculation, we insure our 
hves. Let us hope that hereafter agents will divest life 
insurance of all its clap-trap and sentimentalism, and 
look at it as a plain, straightforward bargain on the 
part of the company, and a simple duty of the policy- 
li older. 

Money Value of Human Liie. 

Sonie people have the idea that life insurance is a 
speculation on a man's life, and is wrong inasmuch as 
human life is too solemn and serious a thing to be made 
the subject of any such contract. It is just here that 
the whole thing is greatly misunderstood. A man 
takes a life insurance policy, so-called, of $10,000. It 
is not his life which is insured against death, so much 
as it is the value of his services ; he insures that quality 
in him which is necessary to support his family. That 
is his income-producing power, or capacity to earn mo- 
ne}'. Men who are physically disabled, and who have 
no ability to support themselves and others, such as the 
insane, the badly crippled, or those in premature do- 
tage, cannot get insured if the company is aware of their 
Condition, even if their health is good, because there 
IS no money value to their lives. But if a healthy man 
gets killed by a railroad accident, his friends bring an 
action against the company and get damages, say $5,000. 



16 IHBTRUGTION BOOK 

This'is the sum which they claim is the money value oi 
that man's future services to his family. 

So in life insurance ; a man insures his money value 
as a producer, or as much of it as he can afford. This 
is a kind of property which the law protects. 

If a man starts a malicious rumor or report against a 
merchant or doctor, which injureis his business and di- 
minishes his income, the law gives a remedy and the 
slandered man brings a suit for damages against the of- 
fender, because a man's income-producing power is just 
as much his property as his bank account. Suppose a 
man gets a salary of $2,000 a year ; the present value 
of it at six per cent, discount — if he were sure of living 
and earning it for twenty years — is $28,000. This is 
his income-producing value as a man, and this is what 
he insures when he takes a life policy. There is no 
more speculation in this than there is in his insuring 
his house or factor^', and his duty is just as plain in one 
case as in the other. If a man has a machine which 
will earn $2,000 a year for twenty years, and if that 
machine should be destroyed by fire, and he could not 
get another under any circumstances, he would instant- 
ly have it protected by a fire policy to its full value. We 
have taken this view of life insurance because we be- 
lieve that when it is stripped of all its mystery and 
false claims upon the public, and is presented as a sim- 
ple business matter, obligatory upon all men to the ex- 
tent of the risk which they run, the money value of 
their services, and the amount of annual income they 
can spare for this purpose, then the objections against 
life insurance will be confined mainly to the stabilitj'^ of 
the companies. 

Magnitude of the Business. 

Hardly any business in the United States has in- 
creased more rapidl}' during recent years than life 
insurance. It has taken so strong a hold upon the pub- 
lic confidence, and has become so firmly established, 
that it is now recognized as one of the leading subjects 
of financial investigation. Our prominent companies 
have been in operation more than thirty years, and have 
acquired a solid reputation for stability and honesty. 
Many of them are as sound and safe as the best banks 
in the United States, and their assets are reckoned at 
from oue to over a hundred millions. There are now 
about thirty prominent life insurance cmpanies in 
active operation in this country. The returns of those 
doing business in New York, which include about the 



FOR LIFE AGENTS. 17 



entire list, as giveu below, show their condition and 
standing December 31st, 1890, and in comparison we 
give the condition of these doing business in that 
state in 1861. 

Condition Condition 

Dec. 31, 1861. Dec. 31, 1>90. 

Companies 17 30 

Policies ill force 57,202 . 1,272,895 

Insurance in force. . . .8164,256,052 83,542,955,751 

Gross Assets 26,670,397 753,228,759 

Income - 4,913,390 187,424,959 

.1,535,791 58,608,615 



PajTiients of Lo.sses , 
and Endownieutd, 



Dividends to Policj'-holders 14,271,501 

From this statement it will be seen how enormously 
the amount of business has incre ised during the last 
twenty-eight years. Since it has acquired such gigantic 
proportions, it is impossible either to ignore it or to 
stay its onward progress. 

Such a business could never have been built up un- 
les-? the manageis of these companies had the implicit 
confidence of the people, and nothing can destroy it 
but a general want of public confidence, caused by a 
gross mismanagement. 

Life Insurance rests on Solid Foundations. 

The public confidence upon which the whole business 
of life insurance depends, rests upon four solid founda- 
tions, every one of which is yearly meeting with the 
most decisive tests : 

The first foundation is capital. Life insurance has 
money fur its basis. The assets of some of our largest 
life insurance companies exceed a hundred million 
dollars. Nearly all this is invested in interest bearing 
securities. These asserts are safely invested. No 
savings bank in the country takes more pains or exer- 
cises greater care in the investment of funds than our 
life insurance companies. The losses from poor in- 
vestments in spite of these enormous figures are insig- 
nificant. The companies are forbidden by laws as 
strict as those which control the savings banks, from 
speculating with their funds, or risking their invest- 
ments for the sake of larger interest gains. 

The second foundation is the i^egal eestkiction 
which is thrown around life insurance companies. No 
other corporation is so jealously watched and guarded 
as this. Savings banks, banks of issue, and trust com- 
panies, can do more as they please with their de- 
posits or fund; but the life insurance companies are 



10 INSTRUCTION BOOK 

held to the strict letter of the law and watched with a 
jealous eye. In every State in the Union where life in- 
surance companies are organized, and where there is an 
Insurance Department, they are prohibited from in- 
vesting their funds in any speculative or doubtful se- 
curity. They must keep up the required standard of 
reserve as prescribed by law. All new companies must 
have a capital stock of at least $100,000, and usually 
this must be deposited with a State official to secure the 
prompt payment of all just claims. 

The third i&> publicity. The annual sworn statement 
of the condition and standing, including the business 
done, assets, liabilities, receipts, expenditures, and 
losses of every company doing business in a State 
where there is an Insurance Department, must be ex- 
amined by a competent State official, and published in 
an official manner, and every agent and citizen has an 
opportunity to read these reports understandingly and 
critically. Contrast this trait of our companies with 
the condition of life companies in England, where so 
many failures have occurred in life insurance in years 
that have gone by. There secrecy of administration is 
the rule; the internal condition and working of every 
company is carefully hid from the public eye, and the 
policy-holder or agent knows nothing but the '^ glitter- 
ing generalities " of assets and policies in force which 
the directors and officers please to publish, and such 
general figures as they may return to a board of 
trade from which only experts can cipher out their 
actual condition, and even these cannot agree in their 
conclusions. 

The fourth is public confidence. There is a grow- 
ing conviction among men that it is their duty to in- 
sure their lives in sound companies. Life insurance is 
not now regarded as a rich man's luxury, only, but the 
poor man's shield. The constantly recurring cases 
of men dying and leaving policies of insurance to be 
paid to their famihes a short time after their death, is 
having its effect on the minds of thousands who never 
would have had any confidence in it. Well-known ex- 
amples and every-day illustrations are the most convinc- 
ing of all arguments. Our great companies, which have 
weathered through a score of years without disappoint- 
ing their policy-holders, are examples of this kind of 
confidence. No one questions their soundness or abil- 
ity to pay their losses as they mature, and most of the 
younger companies are following their footsteps and 
reaping the same kind of reward. Public confidence is 
the vital health of a life insurance company ; without it 



ion LIFE AGKNTb. 19 

it is paralyzed ; without it it can defy commercial crises, 
and when the money market is stringent, it can lend a 
helping hand to those poUcy-holders who are pressed by 
temporary embarrassment. But how is it with a bank 
of issue in a commercial crisis ? Will it ease the mo- 
ney market and accommodate depositors by making 
loans any more readily ? Not at all. Every year the 
pubhc confidence in life insurance companies is growing 
stronger. They may change their plans and rates of in- 
surance in order to keep up with new discoveries in 
the science, but the time has come when they are firm- 
ly established in the confidence of the people — the firm- 
est foundation of all. 



20 



liMSTli UCTWN BOOK 



CHAPTER 11. 

LIFE INSUKAI^CE EXPLAINED BY DIAGEAMS. 

In this chapter we propose to give a few plain and 
simple illustrations of the science of life insurance, and 
the practical advantages and peculiarities of different 
kinds of policies. 

Insurance for One Year. 

The fundamental idea of an insurance premium may 
be illustrated by a triangle : the perpendicular line A B 
representing the premium just paid, and the horizontal 
one, AC, the year, divided into twelve equal spaces 
denoting months in which the insurance is in force. 




During every month and day after the first premium is 
paid, the company agrees to pay the amount expressed 
in the policy should a total loss occur. During this time 
it is earning the premium by carrying the risk, and at the 
end of the year, when the whole is earned, the entire 
premium is the property of the company. If no loss 
occurs on the policy during the first three months, the 
company has earned one quarter of the premium, and 
the unearned part of the premium may be separated by 
the second perpendicular line from the left, which is 
only three quarters as long as the first line, A B . If 
the premium is $100 a j^ear, the cost of carrying the 
risk is between 27 and 28 cents a da5% At the end of 



FOll LIFE AGENTS, 



21 



tliree montlis tlie company has earned $25, and the un- 
earned part of the premium is $75, as shown by the 
second perpendicular line. At the end of six months 
the company has earned $50, and at the end of the 
year the whole $100, and the unearned part of the pre- 
mium is reduced to nothing. The company has now 
fullfiUed the contract. 

In fire insurance the companj' sometimes cancels the 
risk and returns the unearned premium. At the end of 
three months the balance due the policj'-holder would 
be $76, at the end of six months $50, and so on. This 
unearned premium, whether in fire, life, marine or ac- 
cident insurance, is the reserve or liability, and is 
what the company, in equity, owes to the policy-holder 
at any given time before a loss takes place on the pol- 
icy. 

The policy holder, on paying his premium, hires the 
company to stand ready to pay the amount insured 
should a loss take place during the period of insurance ; 
and the shorter the unexpired time the policy has to 
run, the less chance there is of its bei) g called upon to 
pay it. This is the fundamental idea of all kinds of 
insurance. Let us see how it is modified in a life 
pohcy : 

Increasing Risks. 

Here the danger of dying is increased each successive 
year after the assured has arrived at early manhood. 









Fi 


G.II 




^ 


-^ 


-—"^ 


A __-— ' ' 


^-'^ 




\ 


o 

o 


\ 




\ 


V 


\ 






\ o 




\ 


o 




09= 




\ 




^ 


\ 




\ 








N 






\ 2 








S 






\ 2 






\ ^ 








LJ 






\ Ci- 






I\ 








OC 












\ 








CU 






N 






\ 






\ 



o 
o 


o 


o 




g 
^ 


^ 

^ 



m ^ m^ 



o 
o 


8 


O 

o 


00 







At any age, if the policy should be issued for only one 
year its conditions would be governed by the foregoing 
principles ; but if, having arrived at an age when the 
risk gradually increases, he should take out a new poli- 
cy from year to year, the premiums on the same amount 
would have to be annually increased to correspond with 



22 INSTRUCTION BOOK 

the risk. If the premium is $100 this year it may be* 
$102 next, and then the unearned premium at the end 
of six months would be $51, and $25.50 at the end of 
nine months. If the premium the next year is $104, 
the unearned premium at the end of six months is $52, 
and $25 at the end of nine months. 

Since a larger premium must be paid each successive 
year to provide for increased risk, the corresponding 
perpendicular lines gradually increase in length toward 
the right. 

Term Insurance. 

The method of finding the uniform annual premium 
for a term policy of three years is illustrated as follows: 
Suppose we have a class of 10,000 persons of the same age, 
and that during one year 100 die ; there are 9,900 re- 
maining. During the second year 101 died and 9,799 
remain. During the third year 102 die. The first year 
there would be 10,000 premiums paid, the second 9,900. 
the third 9.799. Total, 29,699, to 303 deaths. If each 
person were insured for $10,000, the total loss would 
be $3,030,000, and the amount of each premium re- 
quired would be $3,030,000-^29,699= $102 nearly. 
The policy-holder pays the annual premium of $102, 
but the cost of insuring during the first year according 
to the diagram is only $100 ; hence there is a balance 
or reserve at the end of the first year of $2, and is the 
unearned part of the first premium. The second year 
the insured pays the annual premium of $102, which, 
added to the reserve of $2, makes $104 ; but the com- 
pany spends only $102, leaving again $2 reserve. The 
third year the annual premium of $102 is added to the 
reserve, making $104 ; but this year the policy-holder 
must pay $104 to meet the increased death-rates, and 
at the end of the year there is an exact balance. 

"Whole-Life Insurance. 

Should the insured allow his policy to lapse at the 
end of the first or second year he would lose the reserve 
of $2. Now a whole-life policy with equal annual pay- 
ments is merely a term poHcy ending at the age of 96, 
according to the American Experience Table of Mortal- 
ity, and if the insured should continue to pay an in- 
creasing premium each year on the same amount of in- 
surance, the line A B in the last diagram would become 
the curved Hue A B in the following figure. 

The increase of risk is not uniform, but annually in- 



FOR LIFE AGENTS, 23 

creases as the insurance grows older, so that while at 
age 41 the risk is almost one per cent, of the amount 
insured, at 70 it is about ten per cent., and at 80 about 
fourteen per cent. In the term insurance example, 
given above, we saw that it was necessary to charge a 




higher premium than was required at first, to provide 
for carrying the risk in the older ages, and this rule 
must apply with still greater force to a whole-life poli- 
cy with equal annual payments, as the above figures 
will show — the dotted line denoting the equal an- 
nual ■ j^ayments as compared with the increasing pay- 
ments represented by the curved line.* In whole-life 
insurance this larger premhim is required to provide 
for a fund or reserve, which, with the annual interest 
thereon, will meet the ultimate payment of the risk 
when the insured reaches the age of 96, or if he dies 
before, it wiU be added to the contributions of other 
policy-holders to pay his own claim. 

In these explanations we have not thought it neces- 
sary to show the effect of interest or discount in com- 
puting premiums or reserves. The only effect of this 
element is to make them considerably smaller, and for 
the sake of brevity we omit it. 



* Owing to the limited space, the proportions of these figures 
are necessarily somewhat inaccurate, but they are exact enough 
for i)urposi'S of iUustration. 



24 



INSTRUCTION BOOK 



Single Paymsnt Life. 

In a single payment life policy the premium must be 
large enough, so that the compound interest on it will 
enable it to make its due share of contributions to death 
losses of similar policy-holders of the same age, and 
still add enough to the original premium so that at age 
96 the premium will amount to the policy. Take- the 
case of a man 40 years of age : his single premium for 
$1,000 (American Experience 4^ per cent.) is $330.95. 
Adding interest at 4 J per cent., $14.89, we have $345.- 
84 ; deducting contributions to other death claims, 
$6.47, there remains $339.47 — the single premium for 
age 41. The practical disadvantage of this kind of po- 
licy is that a comparatively small amount of insurance 
is secured by paying a large sum of money ; for the 
policy-holder pays the present value of all the future 
death claims in advance, and this is just equal to the 
present value of the future' net annual premiums. To 
show how unprofitable, compared with other methods, 
single premium insurance is, the following diagram is 
given. 




All the insurance obtained on a single premium life 
policy is represented by. the space above the upper 
curved line, and the amount of the annual premium by 
the space above the lower curved line. The expensive- 
ness of a single premium life policy may be still further 
illustrated by the fact that $330.95 at compound inter- 
est 4:5 per cent., in 25 years will amount to $1,000, and 



FOE LIFE AGENTS. 2S 

at 7 per cent, will equal this in 16 years. At age l-C 
the expectation of life is about 28 years, or at age 68 ; 
and $330.95 at compound interest 4^ per cent amounts 
at age 68 to $1,135.06, and at 7 per cent, to $2,100.42. 
Unless the applicant is in very bad health, this is not a 
profitable kind of policy for him. Keinsuring insur- 
ances from dividends are small policies of this class. 

Limited-Payment Life. 

A life policy with a limited number of premiums is 
better than a single-premium one, but unless the pre- 
miums cease at 70 or 75 it has little advantage over a 
whole-life equal annual premium policy. At the age 
when the premiums cease to be paid, it becomes a 
paid-up policy, and its reserve is equal to the single 
premium. Thus a ten-annual life policy issued at age 
30 requires an annual premium just about one tenth of 
the single premium at age 40, for the premium must be 
large enough to amount to this single premium in ten 
year.s. The disadvantage of the ten-annual life policy 
is that the premiums are too large in the younger years 
for profit, and the less the number of premiums the 
more the policy resembles a single-premium one, and 
the greater the number the more it approaches to ordi- 
nary life insurance. But there can be little or no dis- 
advantage so far as the amount of insurance obtained 
is concerned, in taking a hmited payment life policy, 
tho premiums to cease at age 70 or 75. 

The ten-annual life premium is represented by the 
short curved line near the left of the last diagram. At 
' age 40 it is merged into the single-premium. 

Am omit at Risk. 

In the foregoing example of term insurance (Fig II.) 
we saw that the reserve at the end of the first and sec- 
ond year was $2, and at the end of the third year no- 
thing. If the sum insured was $10,000, at the end of 
the first and second years the policy-holder would have 
a credit of $2, and the amount at risk which the com- 
pany actually carried during these years was $9,998. 
As we regard the reserve at the end of the year only 
for the sake of simpHcity, the reserve on a three-year 
term insurance may be illustrated by the space below 
the curved line, ( Fig. V., ) and the annual insurance 
done by the company by the space above it within the 
figure. The insurance done by the company is the 
benefit which the insured receives from his premiums ; 



2fi 



mSTRUCTION BOOK 



the rest is the unearned premiums ; and as far as any 
benefit is conferred upon the insured at the end of each 
year, this amount might as well be in his pocket ; but 
because he chooses to pay a level instead of an increas- 
ing premium, this amount must be reserved by the 
company. It is evident that the smaller the sum, the 




greater is the immediate advantage the policy-holder 
obtains for his money ; that is, the less insurance he 
does for himself, the more the company does for him. 



Simple Endo-wnient Insurance. 

Endowment insurance policies are illustrated as fol- 
lows : If a man should deposit $96 per annum in a 
savings bank without interest for ten years, on the con- 
ditions that if he were alive at the end of that time 
he should be entitled to $1,000, and also if he died 
in the meantime the company would retain the whole 
amount paid, this would be a simple endowment, (leav- 
ing out the item of interest,) and may be represented 
by the next diagram. 

The reserve at the beginning of each year is shown 
by the first ten perpendicular lines, and the last de- 
notes the sum payable in ten years. In this illustra- 
tion there is no insurance done by the company. The 
poHcj'-holder pays $960 in ten years, and if living at 
that time is entitled to $1,000 ; the balance, $40, is the 
amount the company pays to the policy-holder for in- 
suring himself in favor of it ; that is, the policy-holder 
deposits his money with the company and carries his 
own entire risk of losing it for $40. In this case the 
business of life insurance is entirely reversed. 



FOR LIFE AGENTS. 



27 



Endo"WTnent Insurance. 

But suppose the insured wishes to " hedge " his con- 
tract, and takes out a ten-year term insurance poHcy in 
addition, entitling him to the full amount of $1,000 



Fig. VI 



1 



8 9 10 



should he die in the meantime, the reserve on this pol- 
icy would be represented by the curved Hne at the bot- 
tom of ther diagram, but a large part of the insurance 
he would get under a single-term policy is akeady 
earned by the money he, has deposited with the com- 
pany. Adding these two reserves together, we have 
the upper dotted curved line, and adding the net pre- 
miums on the two policies we have the elongated per- 
pendicular lines. These two policies, the term and 
simple endowment combined, constitute an endowment 
policy of insurance. 

It is plain that this kind of policy is not the most 
profitable one for the policy-holder for the following 
reasons : He gets a small amount of insurance for the 
money XDaid, a large p)art of his premiums is locked up 
in his own deposits, and he has to pay more than his 
share of the expenses of the company in the ratio of the 
benefits received. 

The foUowiug diagram represents the practical work- 
ing of a ten-year endowment policy, age 30. The first 
year's reserve is shown by the quadrilateral over the 
figure 1, the second by a larger one over 2 , and so on. 
If this is a policy of $1,000, the average amount of in- 
surance carried by the company (Am. Ex. 4 5 per cent, 
interest) is only $562 per annum — a little more than 



28 INSTRUCTION BOOK 

one half the amount of the policy. The line A B is the 
net premium or reserve at the beginning of the first 
year, C D is the reserve at the end of the first year. 
The net premium DE being added, we have CE, the 
reserve at the beginning of the second year, and G F 
is the reserve at the end of the year, etc. 



1000 



800 



600 



400 



200 



FiG.VlI 







H 




G 




F 





8 



9 10 



After the first year the lines EG, HI, etc. , are not 
parallel to the bottom line, but incline upward, which 
shows that the interest on the reserves more than equals 
the cost of carrying the risk ; that is, all the actual in- 
surance done by the company is paid for not by the 
annual premiums but by the interest on the money de- 
posited to pay the final claim. 

But a long term endowment nearly resembles a whole 
life policy, which is only an endowment or term insur- 
ance policy payable, according to the American Expe- 
rience Tables, at 96.) If there is anything to choose be- 
tween a whole life policy and an endowment policy ma- 
turing at 70 or 75, the advantage is rather in favor of the 
latter. The endowment premium is somewhat larger, 
to offset the contingency of having to pay premiums 
after this age, or to pay the claim at this period. 



Practical Suggestions. 

Every one solicited to insure his life should ask him- 
self the following questions : How much insurance do 



FOB LIFE AGENTS. 29 

I get for the premiums paid, and how much do I 
insure myself ? Will the advantages resulting from 
paying large premiums be sufficient to justify the in- 
creased expense ? Is it worth while for me while young 
or in middle life to make a contract for insuring my life 
between the ages 70 or 75 and 96 ? Since the working 
expenses are now assessed upon the gross premiums 
paid, will the advantages to be derived from these ex- 
pensive methods be sufficient to justify the payment of 
a high premium rate ? 



30 INSTRUCTION BOOK 



CHAPTEE III. 

THE APPLICATION AND POLICY. 
The Application. 

The application is a proposal, in which the party 
seeking insurance asks for a policy upon his life. As it 
is the basis of the contract of insurance between him 
and the company, the interests of both require that all 
the questions in it should be truthfully and explicitly 
answered. In it he gives a full description of himself 
sufficient for identification. His name should be writ- 
ten in full, without any abbreviations or initials, and 
the same rule should be observed with regard to the 
names of those for whose benefit the policy is made. 
The amount and kind of insurance should be explicitly 
stated, and also, in mutual companies, the method in 
which the surplus is to be disposed of when declared. 
The age of the party should be exactly ascertained, and 
the correct date of birth should be given in all cases 
where it can be procured, since the premium is always 
taken for the age at the nearest birthday. If required, 
the ages of his parents, grandparents, brothers and sis- 
ters, and the ages at which any of them died, should 
also be given with all possible accuracy, and also the 
diseases of which any of them may have died. The 
agent should also notice the present condition of his 
health, and all circumstances connected with his family 
history which it may be important for the company to 
know. If any of his relations have died insane or by 
consumption, it is important that the company should 
know it, however unfavorable the facts may be to the 
prospect of his being accepted. 

The occupation should be correctly and definitely 
stated. It is not sufficient to say that a man is a labor- 
er ; he may be employed in a powder-mill or nitrogly- 
cerine factory. The agent should be careful to explain 
that the application is a part of the contract of insur- 
ance, and that the policy is binding only in case the 
questions in the application are answered truthfully. 

The application should be duly signed and witnessed 
according to the printed instructions of the company, 



FOR LIFE AGENTS, 31 

aud great care should be taken to have that part of it 
exactly correct. If a witness is required, a suitable one 
should be procured. "When the party insures for the 
benefit of any other person than his wife or child, the 
agent should see that this person has an insurable in- 
terest,* otherwise the pohcy will be null and void. 

When the application is finished, duly signed and 
witnessed, the medical examiner makes a careful exam- 
ination of the applicant's physique, and answers in 
writing a list of questions on another page of the appli- 
catiou, and then he returns it to the agent or sends it 
direct to the company. As the application is usually 
the only means whereby the company can judge wheth- 
er the risk is a good one or not, both the agent and 
medical examiner should have all the questions an- 
swered definitely and completely. In an application 
there are usually a great many different questions 
relating to health, habits, family history and other 
matters to be answered. Everj' one of these should be 
carefully read by the agent, the applicant, and the 
medical examiner. It will not suffice to pass any of 
them over in neglect, because in a list of ten thousand 
applications all of these items will in one way or other 
be deemed worthy of special consideration, and the 
officers of a company will not fail to remark any negli- 
gence on the part of an agent in filling out the appUca- 
tion. It is also very disagreeable for an agent, just at 
t^e time he expects a policy from the company, to re- 
ceive a returned application, and a note requesting 
some question answered more fully or some blank filled 
up. It gets the agent into bad repute, it puts the com- 
pany to a great deal of additional labor, and it disgusts 
the applicant to be called on a second time for inform- 
ftiion. 

Some companies require the family physician to an- 
swer additional questions respecting the habits and 
health oi the applicant, and if the amount to be insured 
is very larg% two separate examinations maybe needed. 
Questions are sometimes given to be answered by an 
"intimate friend " of the applicant, but in many cases 
they are simply added to enable the agent to get an in- 
troduction to other parties who may need insurance, 
by showing them the application and obtaining their 
indorsement on it. 



* That is, will the party in whose benefit the policy is made, 
suffer a pecuniary loss by the death of the insured — the loss be- 
ing equal to or in some way commenBurate with the amount of 
the policy ? For further explanation of "insurable iutereat," 
see the last chapter. 



32 INSTHUCTION BOOK 



The Policy. 



The application and policy form the entire contract 
of insurance. The policy commences by making the 
representations in the application its basis, and the 
payment of the first premium to the company or to an 
authorized agent is a binding condition that the policy 
shall be in force. Then follows the declaration that 
the company insures the life of the applicant upon a 
certain plan and upon a given premium, and this poli- 
cy is to remain in force provided he does not unneces- 
sarily expose his life by certain acts which will render 
the policy null and void. These restrictions usually 
relate to travel and residence in foreign countries, or 
unhealthy localities, or engaging m extra-hazardous oc- 
cupations whereby life is apt to be shortened ; or if the 
insured should die by suicide, the hand of justice, from 
gross intemperance, or a duel, then the sum insured in 
the policy shall not be paid, and all the premiums shall 
be forfeited to the company. Hardly any two compa- 
nies agree upon all of these conditions and premises. 
In some companies, which profess to be "extremely 
liberal," and thereby hold out additional inducements 
toi^arties to insure, these restrictions are almost wholly 
removed, but others more '• conservative " adhere to 
the ancient landmarks. 

"When the policy is delivered and the premium paid 
then it is binding upon the company. If the policy is 
delivered before the first premium is paid, and the in- 
sured should die in the meantime, the courts would 
probably hold the company liable for the sum insured, 
even if the special instructions to the agent were that 
no such delivery should be made. The act of the agent 
in delivering the policy has frequetitly been considered 
as a waiver of the right to demand the first premium in 
advance, leaving it optional with the policy-holder 
when it should be paid. A proper appreciation of this 
fact will make an agent careful how he trifles with the 
interests of his company by the delivery of a policy 
without the actual receipt of the cash. 

Different Bands of Policies. 

Whole Life. This is the oldest, the simplest, the 
most common, and in many respects the best kind of 
policy. One of its principal advantages is that it gives 
the greatest amount of whole life insurance for the least 
oremium. It enables a man with a given sum of money 



INSTRUCTION BOOK 33 

to make a larger provision for his family at death, and 
it carries out the idea of life insurance more completely 
than any other kind of policy. But because there is a 
larger ratio of the premiums spftit for the payment of 
losses and running expenses than in any other kind ex- 
cept term insurance, the surrender values and paid-up 
l)olicies on this class must necessarily be small. Ano- 
ther objection to it is that in extreme old age, when the 
insurance is no longer needed to protect one's family 
in case of death, the annual premium is a tax upon the 
poUcy-holder, The conditions of the policy are that 
the premiums shall be paid till death, and if this event 
does not occur till extreme old age, then the insured is 
paying for advantages which he has already received, 
in obedience to one fundamental law of all insurance, 
that the losses'must be paid by the more fortunate who 
escape, and in life insurance the' survivors must pay 
the losses of those who die early. 

Limited Payment Life. — A modification of the whole 
life plan isthe limited payment life, or a policy paya- 
ble at death, but the premiums payable only during a 
limited number of years — usually five, ten, fifteen, or 
other similar period. This has some advantages not 
t'ouiid in the whole life plan. It enables a policy-holder 
to know definitely when his premiums will cease, and 
in taking a policy he can choose one in which the pre- 
miums will cease when he has arrived at an age when 
he has no longer any need for insurance, and when the 
continued payment of premiums would only be a bur- 
den from which he would reap no immediate ben- 
, efit. 

A life policy with the premiums ceasing at the age six- 
ty-five or seventy probably combines about as many 
advantages as any pohcy which can be named. The 
number of premiums is certain, and there is no anx- 
iety lest the policy may become a tax upon the ex- 
treme old age of the insured. Whatever is paid on a 
policy after the age of seventy is usually regarded mere- 
ly as a penalty for prolonged life ; it is contributing to 
the losses of those who die younger, without receiving 
any other advantage than the prospect of its ultimate 
p'ayment ; and unless men are perfectly certain that 
they will be able to aflbrd it, they should so insure that 
this tax upon prolonged life may be avoided. It is utJU- 
ally a privilege in this class of policies that the insured 
can obtain a paid-up pohcy for a definite amount, de- 
pendent upon the number of premiums paid. In 
whole-life polices this is not usually the case. As the 



31 INSTRUCTION BOOK 

premiums in this class are limited in number, they are 
necessarily somewhat larger than those on the whole- 
life plan. 

• 

Term, or Tempoeaey Policies. — This plan provides 
for the insurance of a life during a limited number of 
years, and if the insured survives this period the policy 
expires by limitation, on the same principle that a fire 
insurance policy expires on a certain day and hour 
unless renewed. It is obvious that the annual premi- 
ums must be less in this than in any other kind, be- 
cause there is no insurance during an indefinite period 
of old age to provide for. It furnishes the largest 
amount of insurance for the least amount of money 
during the limited period in which the policy is in 
force. In a life policy the insured will win at last if he 
keeps on betting, or pays his premiums long enough ; 
but in term insurance, unless he dies within a limited 
time, there is no payment of the policy. If he desires 
to keep insured after the policy has expired, he must 
submit to a new medical examination and pay a highc-r 
premium. 

In the Massachusetts Eeports for 1865 we find the 
following testimony of the Hon. Elizur Wright in favor 
of this class of policies terminating at an advanced 
age ; 

"The public still seems unaware of the advantaget 
of temporary insurance — especially of terms sufficiently 
extended to cover the whole of ihe active or productive 
period of life. It seems to be very generally believed 
that if a term policy should be outlived all the pre- 
miums paid for it would be thrown away. This seems 
to be the reasoning of the people who do not regard their 
fire insurance premiums thrown away when their houses 
have not been barned. A man aged thirty ought to be 
able to get a policy of $1,000 for a term of forty years 
by paying at least $4 per annum less than for his whole 
life ; that is the company could well afford to make, 
that reduction in consideration of the limit. Four dol- 
lars per annum, accumulated at six per cent, for forty 
years, will amount to $619. But if he pays it to the 
life insurance company in order to have the policy ex- 
tend over the whole life, and he is in sound health at 
the end of forty years, the company will not give him 
$619 as the surrender value of his policy, its value at 
four per cent, being only $594.38. But suppose he has 
taken the long term policy, investing year by year the 
$4 difference of premium, and dies at the end of thirty- 
fivf^. years. Then his heirs get the amount of the policy, 



FOR LIFE AGENTS. 35 

$1,000, the same as if the policy had covered the whole 
life, and also $445.72, the then amount of the invest- 
ment outside. If he had paid the whole life premium 
his heirs would get nothing outside." 

The prominent objection to this class of poHcies 
among the companies has been the heavy death rate 
found to x)revail among the insured. But of late a 
demand for insurance at a price nearly corresponding 
with its temporary cost has been met by granting short- 
term policies renewable by the insured on certain 
conditions. 

Simple Endowment. — A policy of this class is paya- 
ble to the holder provided he survives a certain num- 
ber of years : otherwise the premiums are wholly for- 
feited to the company. There is no insurance in this 
class of policies, because the company assumes no risk, 
and the amount is payable only in case the policy-holder 
survives. Policies of this kind are very little used, 
except in the case of children whose parents may de- 
sire to accumulate a sum for their education, or start 
in life, should they live to reach a certain age. 

Endowmemt Insurance, — This is a combination of 
term insurance and simple endowment. The net pre- 
miums of these two plans, taken for any age and num- 
ber of years and added together, will make the net pre- 
mium for an endowment policy. It is payable as a 
simple endowment at a certain period if the insured 
survives, and if not it is paid at death, as in term in- 
surance. The advantage of this kind of policy is that 
after the required number of premiums have been paid 
' the insured, if living, will realize the whole amount of 
his policy. For this reason it has some attractions for 
those who insure for investment as well as for protec- 
tion. 

For many years endownment insurance of one form 
or another has been nest to the whole life policy the 
most popular form of contract. Aside from industrial 
insurances, from one-third to one-fourth of all the 
contracts in force are of this character. The pre- 
miums are of course higher than in whole life contracts 
of the ordinary kind, since the policies are expected to 
mature earlier and fewer payments will be made. The 
peculiar feature of all this class of policies is that the 
investment element is larger and the insurance ele- 
ment smaller than in ordinary life contracts, and the 
difference in this respect is greater the shorter the 
endowment term. 



36 INSTRUCTION BOOK 

What is styled self-iusurauce is a prominent feature. 
That is the money which the company holds to the 
credit of the endowment policy largely reduces the 
actual insurance risk which it carries. lu the last year 
of insurance, it has actually received all the money 
needed to pay the claim, and the cost of insurance is 
nothing. 

Short term endowments will do for those who are 
rftpidly making money, and who desire to invest it m a 
manner which will be safe and give their heirs no trou- 
ble to collect in case of their early death. Long term 
endowments, maturing at the age of sixty-five or sev- 
enty, are well adapted for persons of limited means, who 
are desirous of realizing their policies in old age, and 
therefore should be encouraged. 

Endowments are sometimes issued payable in a cer 
tain number (as twenty or thirty) years, and the pre- 
miums payable during a less time, usually ten years. 
There is no advantage in this kind of policy, except 
in certain cases where the payment of premiums would 
be more convenient by this method. The premiums 
are larger than in the regular endowments, and the 
amount of insurance by the company is much less. 

Annuities. — A sum of money paid by a company at 
regular intervals is called an annuity. It is called a 
contingent annuity when the number of payments de- 
pends upon the life of a person or any uncertain event. 
Insurance companies often sell annuities — that is, in 
consideration of a sum of money paid to the com pany, 
the latter promises to pay to the annuitant a certain sum 
during life. Annuities are directly the reverse of in- 
surance. The earlier the death of the annuitant the 
more profitable will it be for the company, and the 
longer he lives the more will he realize from his invest- 
ment. Annuities, which are quite common in, England 
are not popular in this country, probably because their 
true value to people well advanced in life is little known. 
Another reason is that the income from certain kinds 
of securities until lately would often realize as much 
as companies were willing to pay in an annuity. At 
age forty $1,000 will purchase an annuity of $66.27, 
according to the Combined Experience Table and 
4 per cent interest, and at the age of fifty it will pur- 
chase $80.20. Because companies do not give any 
bonus or return surplus upon them, money could 
often be invested in some other securities nearly as 
profitably. But for people well advanced in years, 



FOB LIFE AGENTS. 37 

who have a sum of money for their support, and no 
one dependent upon them, the purchase of an annuity- 
is as safe and satisfactory a method as they can choose 
to make a provision for the remainder of life. If an an- 
nuitant lives beyond the expected period of death., the 
income every year is a clear gain to him. 

Payment of Premiums and Days of Q-race. 

The premium of a policy should be paid on or before 
the day when it becomes due. Owing to the tendency 
of policies to lapse, and in order to give the policy- 
holders every suitable chance to keep them in force, 
some companies have adopted the practice of granting 
thirty days grace in the payment of premiums. When 
the policy-holder takes advantage of this privil ege, a 
company should be careful to collect the additional ac- 
crued interest on the premiums deferred. 

Formerly, when the lapsing of policies was considered 
a Iftfjitimate source of profit, the companies required 
all premiums to be paid by 12 o'clock M. on the day 
they were due, or the whole of the reserve and all divi- 
dends or bonus was forfeited to the company ; but 
more recently it is admitted that there is often more 
profit in keeping a policy in force than by having it 
lanse after so much has been expended to obtain it. 

^ Semi^ Annual and Quarterly Premiums. 

Premiums are also paid semi-annually and quarterly. 
This method makes considerable extra clerical labor for 
the company, although it may in many instances be 
«nore convenient to the polic3--holder. Semi-annual and 
'Quarterly premiums are more apt to be followed by a 
epse of the policy than those which are paid annually, 
And they occasion two and four times as much office 
work. The usual rule to find the semi-annual rate ia 
to multiply the annual rate by 1.04 and divide the re- 
sult by 2 ; and to find the quarterly rate, multiply the 
annual rate by 1.06 and divide by 4. By this method 
the policy-holder pays sixteen per cent, interest on the 
deferred part of the premium. If this fact were gen- 
erally known and explained to policy-holders, deferred 
premiums would not be as popular as they are now. 

Changes of Policies. 

Policy-holders frequently want their policies changed 
from one kind to another, which they think will be 



38 IN8TBUCTI0N BOOK 

more profitable or less expensive. In the general ig- 
norance of the comparative values of the different kinds 
they are sometimes imposed upon by unscrupulous 
agents, and persuaded to take a short term endowment 
or other high-priced policy, when something less costly 
would have answered just as well. As a rule these 
changes are not favored by the companies, for they 
make a great amount of extra work at the home office, 
and the changes must be noted in several different 
books. When the insured wants his policy changed 
he must first return it to the company, and usually a 
new medical examination is required at his expense. 
The reason for requiring a new medical examination is 
that the kind of policy chosen may throw an increased 
burden of insurance on the company, which it did not 
agree to take when it issued the first policy. Thus a 
person may be insured on a ten year endowment, and 
suspecting that he maj'' die in a few years he wishes to 
change it to the whole life plan, which cannot be done 
without additional risk to the company. 

The new policy will either bear a new premium cor- 
responding to the advanced age of the insured, or it 
can be dated back to the time of the first policy, and 
whatever surrender value there may be to the credit of 
the policy-holder can be used in paying the new pre- 
miums. 

If the policy-iiolder or agent discovers that any mis- 
takes have been made in the application or policy, no- 
tice should be given to the office of the company imme- 
diately, that they may be corrected. A post-mortem 
litigation over a policy is not a pleasant thing to con- 
template, and should always be avoided if possible. 

An agent should never induce the insured to change 
his policy for the sake of enabling him to obtain the 
first commissions, this is unjust to the policy-holder 
and brings the business into disrepute. 



tOR LIFE AGENTS. 39 



CHAPTER IV. 

HABITS AND QUALIFICATIONS OF A GOOD 
AGENT. 

Motives for accepting an Agency. 

Bepobe a man commences the business of a life insur- 
ance agent, he should undergo a careful self-examina- 
tion, and ask himself what are the motives which influ- 
ence him. If he undertakes it just for a few months, 
because business is dull and he wants something to do 
till he can find some other employment, then he is tol- 
erably sure to accomplish but very little. When once 
he has accepted this calling it should be regarded as a 
life work. If he sets out intending to make money by 
getting business anyhow, consulting neither the wel- 
fare of the company nor of the insured, if he works for 
that company which pays the highest commissions 
without regard to its reputation or antecedents, then he 
will probably find out before long that he has made 
some fatal errors. Having started with unworthy mo- 
tives, he has adopted unworthy methods of action. It 
is not required that a man should become an agent for 
the sake of benefiting his fellow men, ami thereby 
constitute himself a home missionary of life insurance 
and a colporteur of policies, but the company and the 
public do expect that he will bring with him the same 
honor,, integrity and worthy motives which would lead 
him to enter upon any other honorable calling, and by 
which alone he can attain distinguished success. 

Respect for his Calling. 

Having started with proper motives, the first qualifi- 
cation which a solicitor of insurance should have is a 
consciousness that his calling is an honorable one. x\. 
Vjelief in this truth should be firmly rooted in his mind. 
If other agents are a disgrace to the profession, let him 
resolve to be an exception. If he is engaged for a good 
company, he is conferring a much greater favor on the 
applicant by persuading him to take a policy than the 
applicant is upon the agent by making him the means 
of insuring his life. He should be fully impressed with 
the belief that life insurance is an antidote for half the 



40 INSTRUCTION BOOK 

poverty which afflicts humanity ; that had it been gen- 
erally practiced by every able-bodied man during the 
last fifty years, mankind would have been more indus- 
trious in order to pay their premiums, the old and in- 
firm would now have a comfortable support, and many 
a child would have been assisted to obtain a good edu- 
cation or more respectable position in society, instead 
of having to struggle on through ignorance, poverty 
and seclusion. He should remember that life insurance 
is opposed to intemperaucp. The contract frequently 
stipulates against death from drunkenness or delirium 
tremens. It is the same with many criminal offenses ; 
in short, a life insurance policy puts a man under bonds 
to live and die an industrious, sober and peaceable citi- 
zen. >Now there is a moral element in the business 
which we do not find anywhere else. The " drum- 
mer," or commercial traveler, who sells dry-:goods, 
hardware or machinery, knows that he is coaferring no 
suet lasting benefit on the public as the life agent. 
His goods may increase their physical comforts, but 
they will have no effect on the character of those who 
purchase and use them. But in life insurance it is 
different ; the agent is selling something which will 
make a man love his family more, which will tend to 
restrain him from one of the worst of vices, and will 
elevate him in his own estimation, and in the estima- 
tion of those who love him . And before leaving thia 
topic we quote the oft-repeated words of Hon. Elizur 
Wright, an authority which stands at the head of life 
insurance literature in this country : 

" Among the honorable workers in the civilized 
world, to whom the public as well as the assured will 
die indebted, we give faithful and successful life assur- 
ance agents a high place, and no field that we know of 
is more inviting to an ambition that would devote the 
best of talent to the benefit of society at large and indi- 
viduals in particular." 

Appearance and Manner. 

The agent should be careful not to offend by actions 
or manners which may be repulsive, especially by too 
abrupt a method of presenting the subject. His whole 
duty is to please, to inform and convince, and the two 
latter results cannot be accomplished if the first is ne- 
glected. A great deal depends upon first impressions, 
and if an agent, by his agreeable manners and easy in- 
troduction, secures the good will of a stranger he has 
called upon, his chances of success are greatly im- 



FOR LIFE AGENTS. 41 

proved. Those men whose winning smile and silvery 
tongue have an indescribable fascination about them 
are they who succeed in gaining the attention and se- 
curing a willing hearing. 

Tact 

There are some men wliose personal m agnetism is 
such that they will often persuade a man to insure who 
has fully resolved to have nothing to do with it. The 
applicant finds himself in conversation with one whose 
presence and manner are agreeable to him, and the 
subject of insurance, instead of being annoying, is made 
attractive, new views and features are presented, and 
finally, without intending it, he allows the agent to till 
out his application. Such a quality cannot be taught 
by books or rules ; it can only be acquired by practice 
and example. If this agent, previous to this supposed 
interview, had meditated upon the task before him, he 
might have reasoned in this manner : " I have an arti- 
cle which this man needs : it will make him happier 
and better through life, but it is of such a nature that 
I cannot show it to him like an article of merchandise. 
It is a privilege which he can acquire in a certain con- 
tingency sure to occur ; it is also an obligation to be 
fulfilled by the company ; but I can only explain 
it, and allow him to purchase it if he sees fit. If 
it \7ere a coat, or a hat, I could hold it up before hi m 
or let him try it on ; but now I must convince him 
that he needs this peculiar protection which a hfe poli- 
cy alone can give. How shall he be convinced V Where 
are his weak points ? Is he prejudiced in favor of or 
against , life insurance ? In what way shall I approach 
him V" It is tact which enables the agent to answer 
these questions, to introduce the subject in an agreea- 
ble manner, to watch the countenance of the party and 
discover if possible the thoughts which are passing in his 
mind ; to anticipate objections or parry them without 
seeming to contradict ; at the same time to interest and 
instruct, and finally to secure the application. 

Social Qualities. 

An agent should make friends wherever he goes. In 
all his intercourse with his fellow men he should strive 
to leave a pleasant impression. If the circumstances 
are not propitious for introducing the subject of insur- 
ance he should make his presence not only felt but de. 
sired again. This is not hypocrisy or deception ; it ia 



42 INSTRUCTION BOOK 

what all men ought to practice. In some other kinds 
of business it is equally essential. The salesman is 
taught to be as polite as possible to his customers, and 
to make them desirous to trade for the sake of trading 
with him. But in advocating the cultivation of the so- 
cial qualities, it is not meant that the agent should get 
into the habit of treating his newly-made friends in ev- 
ery sample room or saloon. Such a course would in 
many instances defeat his intentions ; but an easy, 
graceful method of conversation, a general bonhomie^ 
is a quality which will go far toward securing busi- 
ness. 

Cheerfulness. 

Whatever discouragements an agent may meet with, 
he should never allow himself to be betrayed into de- 
spondency or anger. A cheerful disposition is an es- 
sential quality to success. He should not get the idea 
that every man will insure whom he solicits ; the news- 
boys in the street do not sell a paper to every man they 
ask to buy one. In a hundred men there are only one 
or two who will adopt anything new upon its merits 
without seeing how it has succeeded in the case of some 
one else, and then only after a great deal of delibera- 
tion and explanation. Such men should not be de- 
spaired of if they do not look favorably on life insur- 
ance the first time it is presented. 

Nor should the conduct of rival agents disturb his 
equanimity. If they publish false reports about the 
company he represents, let him write to the officers and 
ask them how to counteract them. If the business is 
dull and money scarce, the labors of an agent should 
not be relaxed. In dull times the seed can be sown in 
the minds of those who would willingly insure if they 
had the means ; or better still, it is the time above all 
others to urge insurance as the only sure method of 
making provision for one's family in case of death. In 
life insurance, as in politics, there are many things 
which must be forgotten. If one meets with a decided 
refusal in presenting the subject, there is no necessity 
for him to be angrj'^ or discouraged. Had the agent 
been aware of the motives which led the man to refuse 
to listen in this supposed case, he might have obviated 
his objections or stated some facts which would have 
produced a favorable impression on his mind. It is 
usually ignorance or prejudice which makes men refuse 
to listen to the claims of life insurance, and the only 
way for an agent to do is to calmly and perseveringly 



FOR LIFE AGENTS. 43 

prepare their minds for the reception of the truth. Men 
cannot be driven to insure, nor can they be brought 
into the fold in any other manner than in their own 
chosen way. 

Grood Temper. 

Above all things, an agent should never lose his ten\- 
per. The best way for an agent to disarm a person who 
treats him in a repulsive manner is to have a witty jest 
or a pleasant story to tell, and watch the effect. In such 
a case we should s^y : Get a man to laugh with you, 
but do not laugh at him. It may be that you have pre- 
sented the subject at an unseasonable hour, when his 
attention is engrossed with other things ; your tact and 
good sense will show you whether this is so or not. If 
so, leave him favorably impressed with yourself and 
your cause, with one or two facts to think about, and 
take another opportunity of urging the matter upon 
him. Thert. are some days and seasons of the year 
when trout will not bite, no matter how tempting a bait 
you may place before them. 



Perseverance. 

An agent should never despair of accomplishing some 
great and good results in his work. A short, spasmo- 
dic trial in the business is not a suffici|nt test. Be- 
cause soliciting requires some of the highest qualities 
of a salesman, he should never deem any fact bearing 
' on the business toe insignificant, and no act too trivial 
in order to secure an application. Many men are a long 
time in making up their minds to take a polcy. This 
delay may be caused by a constitutional slowness of 
perception, temporary financial embarrassment, or a 
prejudice which thej^ have against it. It takes time foi 
some men to examine the nature of the contract ; the 
agreement to pay a premium for a number of years or 
during life must be clearly considered. If one view of 
the subject does not produce conviction, another should 
be presented, the agent in the meantime endeavoring 
to study his case and present the most effectual argu- 
ments and remove those objections which stand in his 
way. The same persistency to be exercised in regard 
to individuals should be followed in the management of 
an agency. The great companies, whose influence is 
co-extensive with the Union, were built up by men who 
made life insurance the one great business of their 



44 INSTEUCTION BOOK 

lives, who allowed nothing to turn them aside or to in- 
terfere with their ultimate success. 

Enthusiasm. 

Another qualification which an agent should have is 
zeal and enthusiasm. By this we do not mean a noisy 
boisterous manner, which repels more than it attracts, 
but an earnestness which shows that the agent is sin- 
cere in what he says. It is not sufficient to present the 
subject of life insurance to a stranger and await his an- 
swer yes or no. An agent should feel that he is endeav- 
oring to do a great kindness to the hearer ; that life in- 
surance is one of the most important subjects which 
can attract his attention, and an earnest, sincere man- 
ner of presenting it i^ the only way to accomplish great 
results. He should talk as if he believed in it, and as 
if the future financial welfare of the listener depended 
on his taking a policy. Nothing short of this will an- 
swer. 

Notice how the successful lawyer talks to the jury to 
win his case ; every muscle in his body speaks — every 
word is instinct with feeling and argument ; and those 
who have won the great prizes in life insurance have 
been men who could sit down and so interest the 
hearer, so lead him on from one point to another, pre- 
senting the truth in such a clear and convincing Hght 
that he would find himself gradually and impercepti- 
bly convinced in spite of all his previous resolutions to 
the contrary. There have been and still are men in the 
field whose persuasive powers are so great, and whose 
earnest appeals so irresistible, that about all they need 
to secure an application is a fair hearing and a good op- 
portunity to present the subject. Earnestness, then, is 
a trait which should be carefully studied, for without it 
the agent has little chance of success. 

Honesty in Soliciting. 

We have now come to one of the most important sub- 
jects in the whole work, because one of the greatest 
present curses of the business is the way in which 
agents mi srepresent it. Some agents seem to think it 
necessary to tell larger stories about dividends and sur- 
render values than any other agent, and to give the 
most positive assurances that the company which they 
represent is far better in every respect than any other. 
In discussing the qualification of truthfulness we pro- 
pose to speak on the subject with exceeding plainness, 



FOR LIFE AGENTS. 45 

Aud not to leave unsaid anything necessary to purify 
the moral atmosphere of the agency business. 

An agent should deal honestly with the applicant. By 
this we mean that he should not allow himself to re- 
commend any plan of insurance which will not con- 
tinue to be satisfactory to him. He should not let his 
greed of first commissions urge upon him a five or ten 
year endowment with a costly annual premium, when 
a whole life policy, or life policy with fifteen or twenty 
annual payments, would do just as well, and be a great 
deal more appreciated by the policy-holder, as soon as 
he learned the difference between them. A great part 
of the disfavor into which hfe insurance has fallen 
among a certain class of men, and the greatest part of 
the lapsed and paid-up policies, are traceable to the 
misrepresentations made by agents in procuring the ap- 
plication. An agent should never tell a man in moder- 
ate circumstances and with a growing family that he 
had better take a ten year endowment instead of a 
whole life policy, costing the same annual premium, 
for instance, unless he is convinced that this is the 
form of policy which upon trial will be found most 
satisfactory to the insured. Agents have been greatly 
to blame iu the past for thus recommending plans of 
insurance that were not adapted to the circumstances 
of the applicant, for the purpose of securing a larger 
commission. He should be frankly told what form of 
poljcy is best calculated to meet his needs. But the 
companies have been to blame as well as the agents, 
owing to the failure of the officers to properly grade 
the commisHions, thus making it much more lucrative 
for agents to insure on certain plans than on others. 
More information now prevails, however, than formerly 
on this subject. Applicants themselves exercise a more 
intelligent discrimination regarding their forms of con- 
tract iu connection with their special requirements. 
They depend more on their own judgment and less 
on that of the agent. The whole business of life 
insurance is better understood by the people than 
formerly. In all cases when the applicant does not 
i^xprcbs any preference for some particular plan of iu- 
iurance, alter finding out what one is really best for 
him in his present condition, the agent should urge 
that which is the best adapted to his circumstances. 
Then the policy will not be so apt to lapse, the renew- 
als will be more promptly paid, and the company will 
have a better reputation for the honorable deahng of its 
agents. In all these matters the agent is not working 
tor himself alone, but for the company, which is inter- 



46 INSTRUCTION BOOK 

ested in having a class of business whicli will stay on 
the books till the claims mature. By taking a manly, 
fcitraightforward course, by consulting the real interests 
of the insured, and recommending only such forms of 
policies as will be really satisfactory when clearly un- 
derstood, the agent is honoring his calling and laying a 
foundation for many future renewals. 

Consequences of Misrepresentation. 

A dissatisfied policy-holder, one who believes that he 
has been misled by an agent, is capable of doing an im- 
mense deal of harm. Perhaps he rushes into print, 
showing how the agent promised one thing and the 
company performed another ; how he does not get the 
expected dividends ; how the company will not give 
him any surrender values ; and all the neighborhood is 
excited about the swindle of life insurance. If the 
company does not fulfill all the promises which tJie 
agent made when soliciting, he is very apt to hear of 
it when he collects the renewals. Othe policy-holders 
will listen to his statement, and the policies will gradu- 
ally drop off and few if any be added. 

It is a lamentable fact that the policies, as a class, 
taken by American companies, are short-lived ; in the 
best companies only seven or eight years is estimated 
the average, while iu France the average age of a poli- 
cy is upwards of twenty years, or about three times as 
great as ours. And this is largely owiug to the dissat- 
isfaction of the public and the misrepresentations which 
agents have made about future dividends, surrender 
values, liberality of the company, etc. Life insurance 
in this country has not been overdone, bnt it has been 
badly done, and a thorough reform is imperatively de- 
manded. 

But the fault is not wholly on the part of the agents ; 
the officers of many companies are equally to blame for 
furnishing the means and the opportunity of misrepre- 
sentation. They supply agents with printed documents 
giving wonderful hypothetical statements which may 
be reahzed under certain conditions ; they cause "great 
expectations " and give infinitesimal results. The agent 
is taught that his business is merely to get applications 
and to forward the premium, no matter what state- 
ments have been made to procure them. No attempt 
is made by such companies to elevate or purify the bu- 
siness. If the agent succeeds in bringing in a sufficient 
number of applications, he is honored with a front seat, 
if not. he is of no importance. 



FOR LIFE AGENTS. 4n 

Some Companies insist upon the Truth in solicit- 
ing. 

But iu contrast to this there are some companies 
which take a noble stand against all kinds of misrepre- 
sentation and deception in soliciting. They are not so 
numerous as they should be, but we hope their number 
is annually increasing. Such companies will be the 
most prosperous when once the people learn that they 
are neVer deceived or disappointed by their agents. 
When Mr. A. T. Stewart was once asked what was the 
greatest difficulty he had to overcome in his business, 
he replied, it was to make his clerks speak the truth. 
In his immense palatial stores, the largest on the conti- 
nent, no misrepresentation of the quality of goods was 
allowed. The same rule should be insisted npon in so- 
liciting life insurance ; the standard of veracity should 
be placed high, and then the business will be more ho- 
norable and more profitable. The following extract 
from a letter of the secretary of a life insurance com- 
pany to an agent, expresses our opinion so fully that 
we deem it worthy of a place here. 

•' With a full knowledge of the fact that there are in 
the field of life insurance a few men who belie the be- 
nevolent nature of the institution, and give evidence of 
a want of that high honor that bears a man above the 
trrcke of charlatans, and of that strict veracity which 
will sacrifice gain to truth, the officers of this company 
have from the first set their faces against the employ- 
ment of any sachmen, on any terms whatever. They 
will have nothing to do with falsehood or deception in 
ftny form or any degree. They do not believe that they 
are necessary to the success of the business ; on the 
contrary, they are fully persuaded that they are an in- 
jury and a disgrace. They cannot therefore tolerate for 
a moment the idea that one of the company's agents shall 
use such means for success. The company seeks and de- 
sires men as agents who not only will not, but who can- 
not ^ei then own consent to resort to falsehood or de- 
ception in order to succeed in any c ise. The company 
wants truthful men, men who cannot stoop to ". mean 
act for the sake of gain ; who esteem honor and truth 
as rubies above all price. Such men give character not 
only to the institution, but to the company they repre- 
sent, and redeem life insurance from the obloquy which 
a few men here and there have thrown upon it by false 
representations. The institution is all that it claims to 
be, and truth and probity will build it up more rapidly 
than falsehood and deception." 



48 • INSTRUCTION BOOK 



Character in an Agent. 

In addition to what has been said is it necessary to 
discuss the importance of an unblemished reputation 
for veracity and honesty in an agent ? In some kinds 
of business a man's reputation is his stock in trade : 
there are manufacturing establishments whose trade- 
mark is worth a fortune ; when people buy their goods 
they know that no deception is used in trying to sell 
them as anything different from what they really are. 
There are some lawyers whoye advice would be cheap 
at one thousand dollars, while that of others would be 
dear at ten. Why this difference ? Because in the one 
case a man has spent years in building up a reputation 
which will last his lifetime. Men believe what he says, 
and they know he would not make any incorrect state- 
ment. It should be so in life insurance ; every agent 
should strive to have such a reputation for veracity and 
honor, and be so well known in the community where 
he is at work, that his word would never be questioned. 
And if every agent would make this his aim, and if com- 
panies would take special pains to see that their agents 
made no misrepresentations, we should have far less 
dissatisfaction with the companies than at present, and 
one of the most troublesome features in the business 
would be removed. An agent passing a few weeks in a 
town, and talking with hundreds of people, soon be- 
comes a marked man ; people remember his statements 
and talk of them to each other, and if he insures a 
number of people, they remember him as long as their 
policies are in force. If he has secured their applica- 
tions by some exaggerated statements about dividends 
or profits, or told some preposterous story about the 
advantages of his company, they will talk of it to oth- 
ers, and neither himself nor his company can do any 
business there afterward. And this is the more palpa- 
ble bedause people feel more sensibly when they are 
duped by a life insurance agent than by almost any 
other person. If a man buys a horse he sees the ani- 
mal ; he takes the reins and drives him, and in his pur- 
chase relies upon his own judgment ; but the contract 
of life insurance is one which he seldom or never see s 
till he has paid for it, and he cannot tell whether the 
agent has misled him or not for several years afterward ; 
be does not see the company or know anything of its 
affairs ; he takes everything on the word of the agent, 
and if he is disappointed, he lays the whole blame upon 
the company. The company may never have given the 
agent any authority to make these statements ; that 



FOR LIFE AGENTS, 49 

makes little difference as long as he has procured ap- 
plications by deceptive methods. The reputation of 
the whole company and that of every other agent suf- 
fers by the conduct of one who is unable or unwilling 
to maintain a rigid adherence to the truth. If an 
agent, in returning to a place, finds those whom he for- 
merly insured are satisfied with his company, he is far 
more likely to get new business than a stranger ; he 
can point to his old applicants and say, " Here are men 
whom I insured some years ago ; they keep their poli- 
cies in force, and are satisfied with them." His charac- 
ter now bears its fruit. 




60 INSTRUCTION BOOK 



CHAPTEE Y. 

INFOEMATION NEEDED BY THE AGEFT. 
Should kiiow what Life Insurance is. 

Suppose a lady calls at a drygoocls store, the clerk 
shows her a piece of goods , and the following conver- 
sation takes place : " What kind of material is this 
made of?" she asks, "is it cotton, woolen or silk ?" 
*' Oh, I do not know, " replies the clerk. " it is clotB, 
and that is all I know about it." "But is it the spring 
style or is it a remnant left over from last year ?" "I do 
not know, madam ; it is cloth, and it is my business tc 
sell it for so much a j^ard." " Is it fast colors — will it 
wash ?" "I do not know ; you had better buy it and 
try." "But this is for gentlemen's wear ; I want some- 
thing for a dress. " ' ' Oh, that will make no difference ; 
if the dress is made to fit, it will wear just the same." 
Now how valuable would such a clerk be to a merchant 
who wished to work up a first-class retail trade in a fa- 
shionable street ? To sell goods readily, a clerk must 
know what the goods are, and their various qualities. 
But a good clerk will often sell a piece of goods to 
a customer when she had no idea of purchasing. ' ' Now, 
madam," he says, "here is a new style of silk ; it 
is just imported, and you are the first customer who 
has had the pleasure of examining it. See what a 
gloss it has, and how fine its texture !" and as he holds 
it up to the light, the customer is perfectly enchant- 
ed with it, and as the clerk dilates upon its beau- 
ty and good qualitiefc, she is more and more convinced 
that she needs it, and finally concludes that she can- 
not do without it, and the clerk sells her a bill of 
goods. 

If an agent goes before the public like clerk No. 1. 
and says, " G-entlemen, I have several kinds of insur- 
ance for sale here, with the prices given in this little 
book, but I do not know the difference between these 
plans — which are adapted to your peculiar situations and 
which are not ; like the boy at the show, you pays your 
money and you takes your choice ; but this fact you 
may depend upon, the more money you pay for premi- 
ums the higher commission I shall get, so let me have 



FOR LIFE AGENTS. gj 

your applications for $10,000 apiece," it cannot for a 
moment be supposed that these inducements would be 
very efficacious, or that his proposal would be immedi- 
ately accepted ; but this is almost the very course 
which many agents take. With no preliminary training 
or study of the subject, with no fixed ideas of insurance 
as a business, they stuff their pockets with pamphlets 
and commence sohcitmg. When asked any pertinent 
questions they will say that their company will do as 
well as any in the United States, or that all plans of in- 
surance are good, but as high-priced articles are usually 
of a better quality than cheap ones, so short-term en- 
dowments are much better for a man than whole life 
rates. On this subject Mr. Cornelius Walford, of En- 
gland, made the following pertinent remarks : 

" With agents of insurance companies the proverb 
that ' knowledge is power, ' applies with peculiar force. 
The man who knows most of the theory and practice 
of the particular branch of insurance which he is en- 
gaged in advocatiag, should, all other things being 
equal, be the most valuable agent to his particular com- 
pany. In addition to a general knowledge of the busi- 
ness, the agent requires to know not only every point 
concerning his own office, but also a great deal con- 
cerning others ; by these means only will he be able to 
make way in these days of increasing competition. '' 

Or in the words of Mr. Philip Sayle : 
^ " Perhaps the most damaging and most incomprehen- 
sible evidence of the narrrow-minded agent is found in 
the limited view he takes of the principles and applica- 
tiou of the science with which he is associated. Su- 
perficially he knows the application of the different 
modes of insurance put forth in the prospectus, but 
ask him for the reason of certain processes, and he is 
all ' at sea. ' He fails to observe that the ' sign of the 
times ' is to require not merely a human machine that 
can fill up a proposal form and collect a premium, but 
an intelligent, thinking agent, who can freely converse 
on the subject, and explain the principles on which the 
matter is conducted. The great publicity which is now 
given to assurance matters, and the evident reaction 
which has set in favor of the subject both here and 
abroad, will compel all who intend to prove themselves 
valuable agents to post themselves up in that informa- 
tion which once belonged exclusively to the actuary." 

Adaptation of Different Plans. 

But suppose that the agent, educated to know the dif- 
ference between the different classes of insurance, talks 



62 INSTRUCTION BOOK 

to men in this style : "My dear sir, yo"-! are engaged in 
in extensive stock speculations ; you are making money 
rapidly, but in a manner which is not without its dan- 
gers. An endowment would be a good investment for 
these reasons : you will get a fair rate of interest on 
your money, even if you live till your policy matures, 
and if you die, you will have your life insured ; if re- 
verses should come in a few years, a proportional 
amount of your policy would be secured to you, and 
you can afford such a kind of policy. " To a single man 
who has a liberal salary he says : " Let me urge you 
to take a ten year life policy. In a few years you will 
be married and your family expenses will be increasing. 
After ten payments you will have no more premiums 
to pay, but if in a mutual company the amount of 
your insurance will be increasing as long as you live. 
This is exactly the kind of policy you need." To a 
man in moderate circumstances with a large family he 
says : ' ' You need an annual payment life policy ; you 
cannot afford anything more expensive, and in this man- 
ner you will get the greatest amount of insurance with 
the least expenditure of money. It is precisely what is 
adapted to your circumstances." 

Now the agent who understands the advantages and 
disadvantages of the various plans will not offer every 
man the same kind ; he will take care to inform him- 
self what is best adapted to the wants of the applicant, 
and then he will explain to him how and why it is he 
needs that particular kind of insurance. But in order 
to judge correctly, he must know the fundamental prin- 
ciples ol the bus!n ss. In earlier years it was very 
different; then nearly all the policies were on the whole 
life plan; it was Hobson's choice with the agent and 
the assured; now nearly every company has a variety 
of plans and different rates for the same age, and new 
plans are being invented every year, with more or 
less excellences or defects. An agent must understand 
these differences ; he mast be able to explain them and 
point out their faults. It is not necessary for him to go 
through the whole list, aiscussing each rate, but when 
called upon for an explanation of a particular premium, 
he should be able to give it in a clear and satisfactory 



New^ Plans and Features. 

Every year new plans and new features are presented 
to the public. Some companies adopt them, and by a 
series of hypothetical calculations explain how the in- 
Burance will be afforded almost or quite for nothing. 



FOR LIFE AGENTS. 53 

One agent is told that another is doing a successful 
business on this "new plan," and he wants his compa- 
ny to adopt it. If the officers of the company see 
through the shallowness of any pretension and refuse 
to touch it, he thinks they are too conservative. But 
an agent with a clear understanding of hfe insurance 
will be able to tell the wheat from the chaff, and the 
new plans of other companies will not give him much 
trouble. 

Agents must instruct the Public. 

Another reason why agents should be well posted in 
the principles of the science is that the outside public 
depends almost wholly upon them for its knowledge of 
the business. Men who have never made it a subject 
of careful study know no more how to analyze the an- 
nual statement of a life insurance company than how 
to dissect a corpse. Usually those only who come in 
contact with agents have any clear idea of the import- 
ance of such knowledge. Since it is a part of the duty 
and mission of agents to educate the public on this 
subject, how important it is that they should be able to 
do it well. How can we account for the fact that juries, 
in a life insurance case, are so often prejudiced against 
the company, and no matter what the evidence may be, 
they so often decide against it ? Are not the companies 
to blame for this ? Had they employed trustworthy and 
well-informed agents, who would not or could not make 
misrepresentations, there would not be so many peo- 
ple who look upon life insurance as a scheme to get 
their money and return them little or none. 

Insurance Literature. 

The best men in auy profession are those who keep 
themselves fully informed of the latest news and disco- 
veries in their business. It is so in law, medicine, and 
every science. Within the last few years nearly every 
business has produced its special organs. Even the 
manufacture of j)aper, iron, and tobacco have their reg- 
ular journal devoted to these trades. Insurance is no 
exception to this rule. Insurance books and papers 
must be read if agents mean to succeed. There is no 
need of reading all of them, but a judicious selection 
can be made which will not involve a great expense and 
which will be of great value. In insurance periodicals 
they will find articles explaining the science, the plans 
adopted by different companies, charts, tables and sta- 
tistics, showing their standing and progress. There are 
eleDientary books which explain the science, reports of 



54 INSTRUCTION BOOK 

insurance officials, giving the standing of the compan- 
ies in detail, and their opinions, which are often impor- 
tant and instructive. A little careful observation will 
show that the most successful men in any business are 
those who are fully posted in it, and are the first to seize 
every advantage as fast as it is ofi'ered. 

Need not be an Actuary. 

A private in the ranks should know the company 
movements, but it is not necessary for him to compre- 
hend all the manoeuvres of a brigade drill. It is the 
business of his captain and colonel to understand them. 
His duty is simply to obey intelligently the orders of 
the captain, and they are confined to the school of the 
company. This example illustrates the wants of an 
agent. There is a certain amount of information about 
insurance which he must possess in order to succeed ; 
but there are many things which are not necessary for 
him to understand. If an agent has only a smattering 
of actuarial knowledge, and relies mainly upon it to con- 
vince the public of the need of insurance, it is apt to be 
a damage rather chan a benefit to him. If he perplexes 
his customer with formulas, figures and ratios, and ci- 
phers it down to the nearest cent just how much his 
death claims and surplus interest will be, and what rate 
per cent, he will make on his investment, the man loses 
his way in the chaos of figures, and the probability is 
that the application will be lost. This sort of discourse 
should never be voluntarily offered. If explanations 
are asked, they should be given in a simple, clear and 
correct manner. It is well enough to make a few sim- 
ple statements, such as the premiums during any peri- 
od, or an illustration of the benefits of insuring, but if 
an agent attempts to demonstrate to his friend that by 
the contribution plan or any other plan his annual pre- 
miums will net him from thirty to forty per cent, divi- 
dend as a clear profit in the transaction, if the listener 
is a man of much intelligence, he will suspect that life 
insurance companies depend upon exaggeration for their 
prosperity. An agent makes a great mistake when he 
undertakes to explain the whole science in order to se- 
cure an application. The agent should be able to give 
satisfactory answers, but a man's attention should not 
be drawn away from this leading thought, that he needs 
insurance as a protection for his family in case of death. 
If he objects that the science is deceptive, that the co- 
operative stjde of insuring is safer and cheaper, or is 
skeptical on any point, the agent should be able to meet 



FOR LIFE AGENTS. 55 

these objections in a clear and conclusive manner ; but 
ordinarily tie will do well to avoid abstruse mathema- 
tics. 

It is sometimes said that "there is no need of an 
agent's knowing anything about the science of insur- 
ance, because he gets the idea that figures will not lie, 
and by placing constant reliance upon them he loses 
the application." It is not the knowing, but it is the 
telling this kind of information at unseasonable times 
which causes the trouble. It is important for a minis- 
ter to understand Greek, and for a lawyer to know some 
thing of Latin, but the former wculd make but few con- 
verts by quoting the Septuagint, and the latter would 
not influence a jury by repeating passages from the 
Pandects in the original. A life insurance agent, like 
any one else, can make himself ridiculous by an osten- 
tatious parade of his knowledge, if he has a weak un- 
derstanding or excessive vanity. But if he shows the 
same discretion as other business men, he will find that 
all the information he can acquire will aid him in pre- 
senting the truth in new and forcible ways. 

Should understand Interest and Discount. 

An agent should have sufficient knowledge of arith- 
metic to perform all the ordinary operations in interest 
and discount in a rapid and accurate manner. It some- 
ti^mes happens that a man wants to count the cost for a 
series of years ahead, or know the comparative profits 
of investing in insurance or in some other security. On 
such occasions a simple illustration, neatly and correct- 
' ly preptired by means of the tables, which are easily ac- 
cessible, will be of great service in producing convic- 
tion. 

Well posted about his own Company. 

An agent should be thoroughly informed about the 
financial history, condition and success of his own 
company. This information can easily be. obtained 
from the State reports or from the printed circulars is- 
sued from the home office. He should be thoroughly 
acquainted with all its plans and peculiar features, and 
if necessary, he should spend time in giving them a 
careful investigation. If practicable, he should have a 
few special examples, showing the benefits derived from 
certain policies. He should examine every table of 
rates and be able to select any premium on the slight- 
est notice. He should read all the advertising pam- 
phlets of the company and thus he will know just what 



66 INSTRUCTION BOOK 

is needed. If there is any new feature which the com- 
pany makes a specialty, he should know all about it, 
and how it compares with the plans of other compa- 
nies. K the company has any definite rules about sur- 
render values, he should know what they are, so that 
he can always avoid making misstatements on the sub- 
ject ; but if this information is withheld from him, he 
has no right to assert that the company adopts any par- 
ticular practice or rule, but he can only say that the 
matter is in the hands of the officers, and that they 
consider both the wants of the policy-holder leaving 
the company and the rights of those who remain. 
Whenever the company makes any change in its meth- 
ods of doing business, every agent ought to be in- 
formed of it and clearly comprehend its nature. But 
although an agent should be so familiar with his own 
company, he should not make this the principal basis 
of his argument when soliciting. He must talk some- 
thing else besides " company " to a man in order to in- 
sure him. The old and familiar name of the company, 
the respectability of the directors, its favorite plans, 
conferring unheard-of advantages— all these will not 
suffice unless the agent makes the need of insurance the 
principal motive for taking a policy. 

Knowledge of Human Nature. 

We have come now to the most important qualifica- 
tion of an agent : He should understand human nature 
thoroughly. He may understand life insurance well, 
he may know all about his company, he may be able to 
demonstrate the financial value of insurance to the 
nearest cent, yet all this will fail unless he knows men. 
A physician may know all about the properties of me- 
dicine, but if he knows nothing of the human sys- 
tem in health or disease, then he will make some 
fatal blunders in attempting to cure patients. A phy- 
sician comes to the bedside, he feels the pulse, looks 
at the tongue, and hears the story of the patient, and 
then decides what ails him, and what medicine is need 
ed. So in life insurance, an agent talking with a man 
about his business, his prospects in hfe, his circum- 
stances and family, can determine what plan of insu- 
rance will suit him, or whether he cares very little about 
the subject. When he makes a new acquaintance, he 
should ask himself, "What arguments will have the 
most influence on him ? Where are his approachable 
points ? Is he an impulsive man, one whom I cau in 
Bure at a single interview if I get a fair chance to pre 



FOR LIFE AGENTS. 57 

sent the subject, or is he slow in coming to a conclu- 
sion — one who will need to ponder over the matter a 
long time ? It is this power of reading character at a 
glance which gives some agents their great superiority 
over others ; they form their conclusions with lightning 
rapidity, and act accordingly. 



58 INSTEVCTION BOOK 



CHAPTER m. 

WHAT TO AVOID. 

In this chapter we shall discuss some of the faults 
which agents are apt to adopt, and endeavor to give 
them a word of caution which may save them from mak- 
ing fatal blunders. 

Too Much Talking. 

It sometimes happens that an agent believes that the 
way to insure a man is to talk insurance to him as long 
as he is willing to listen. This is offcen a fatal mistake. 
In purchasing insurance, men are laying themselves un- 
der obligation to make a regular payment of money for 
several years, or for life, and as a general rule they can- 
not decide upon the matter at the first interview, espe- 
cially if the policy is a large one. Most men are rather 
slow in making up their minds about incurring further 
obligations, and conviction must come gradually. If a 
man has had arguments in favor of life insurance pre- 
viously presented to him by other agents, and has a 
clear idea of what life insurance is, then one or two 
convincing arguments may be all that is needed, or if 
the sum is so small that he feels that it makes little or 
no difference with him financially, the agent may be 
able to insure him with little hesitation. The first 
question in his mind should be, " Do I need this insur- 
ance ? This is the main point in persuading a man to 
insure ; if he can be made to believe this, then the rest 
is not so difl&cult. When this is answered m the affirm- 
ative, the next is, " How much can I be sure of paying 
for ?" Neither of these questions can be promptly an- 
swered unless he has carefully considered the matter 
beforehand. 

The agent should confine himself to argument and 
avoid lecturing. The applicant should be encouraged 
to ask questions and suggest objections if he feels dis- 
posed. In this way he will take more interest in the 
subject and give greater attention. Having discovered 
the strong points in a man's character, and the princi- 
pal reasons which have hitherto caused him to remain 
uninsured, the agent should make those his principal 



FOR LIFE AGENTS. 59 

points of attack. If the man is convinced that he 
needs insurance, and is resolved to take as much as he 
needs, the work is done ; there is no necessity of ex- 
plaining the whole science to him. It looks too much as 
if the agent tried to drive him into the company nolens 
volens. M-n may be induced, but not compelled to in- 
sure. In all cases no favorable opportunity should be 
lost, no advantage neglected, but when the man is evi- 
dently tired of the subject and wishes the agent any- 
where else, then it is time to try some other method, or 
leave the. matter until another opportunity. 

By too much talking he discusses many matters 
which may not be necessary to secure conviction. Any 
definite statements about dividends or surrender values 
should be avoided, unless the agent has the terms 
which the company authorize him to make, and which 
the company is pledged to fulfill. The same is true in 
regard to other companies; all reference to them should 
be avoided if jDOSsible. When not needed, all allusion 
to these subjects is so much ammunition thrown away, 
but if insisted upon,.the agent should state clearly and 
precisely what the company will do according to the 
terms of the policy, or what has been its practice here- 
tofore ; or he should merely say that these matters are 
entirely under the management of the officers. It is al- 
ways the safest to leave out all those topics which are 
not absolutely necessary to win the case. 

Denouncing other Companies. 

It. is unwise for an agent to make an indiscriminate 
onslaught against other companies. By so doing more 
enemies than friends will be made. If a young physi- 
cian should commence practice in a large town,and be- 
gin by denouncing all his medical brethren as quacks, 
he might get some patients, but it is far more likely 
that he would have the whole town arrayed against him. 
Almost every man who has paid any attention to life in- 
surance thinks favorably of some particular company ; 
either he has been solicited for it, or has some friend in- 
sured in it, or has read some flattering statement about 
it. For an agent to say that his company is the only 
one in the country worthy of confidence, and that all 
others are vastly inferior and worthless, is sheer non- 
sense. No matter what company an agent may repre- 
sent, there are others in the country just as good in 
many respects as his, although there may be points iu 
which his company excels. An intelligent agent of al- 
most any company can take an insurance report and 



^0 INSTBUCTION BOOK 

show that in some particulars his company is to be pre- 
ferred to many others. But if an agent endeavors to 
make progress by "running down other companies," 
some one equally intelligent as he is may take a chart out 
of his pocket and say : ' ' Your company is far behind 
others in this and that particular ; look at these ratios, 
these assets and expenses." Co*hstaut abuse of other 
companies lays an agent open to suspicion as a man 
whose statements must be taken at a discount. Many 
will say, "How is it possible, while there are a hundred 
life companies, that this agent has got hold of the only 
reliable and safe one ? Life insurance is open to all 
for competition, like any other business, and I know 
that there are many companies honorably conducted in 
which I would trust my savings, with the hope that my 
family may some day be benefited thereby." Another 
reason why other companies should not be indiscrimin- 
ately denounced is because an agent cannot always 
make good such assertions. If a man contemplating in- 
surance once detects an unsound or exaggerated state- 
ment in an agent who is a stranger to him, he regards 
him with suspicion afterward, and confidence once lost 
in this manner can seldom be regained. This mode of 
warfare has been tried by companies as well as by 
agents, and uniformly fails. Some of our most pros- 
perous companies have been the most bitterly assailed 
by others through the press and by agents, and what 
has been the result ? They seemed to thrive under 
abuse ; their own agents took up the cause with new 
.ardor and greater success. Abuse is not the weapon 
which wins in soliciting ; it is a sword which cuts the 
hand of him who uses it, and he who draws it in an of- 
fensive warfare is usually the first to sheathe it. when 
a rival company is mentioned to an agent, it is far bet- 
ter to say : "Such a company is a good one ; if you 
have insured in it you have done well, or if you have 
promised to insure in it you will find it worthy of your 
trust; but lean ofi'er you advantages just as good, and 
in some particulars, I think you can do better with me." 
Such an answer will go much farther toward securing a 
patient hearing and be more likely to secure a policy 
than abusing it is as a dangerous rival. If, however, an 
agent is confronted with a company which is evidently 
unsound and unworthy of confidence, he should not 
hesitate to say so, if he can give substantial reasons for 
his opinions and pi-ove his assertions by official reports 
and statistics. But under all circumstances we do not 
think it is best for him to make a Don Quixote of him- 
self, and spend his time on all sorts of windmills. 



FOR LIFE AGENTS. 61 



Advising Unprofitable Plans. 

Moat people, when called upon to insure, know little 
or nothing of the kind of a policy thej' need ; unless 
they are somewhat informed about life insurance, they 
do not know why they will not get just as much insur- 
ance out of a ten year endowment as out of a ten year 
term policy. They usually take such kind of a policy 
as the agent recommends to them, and some agents, 
who look more to their first commissions than the good 
of the company or the policy-holder, make a specialty 
of short term endowments. It is the agent's duty to 
know what kind of policy is best suited to a man, tak- 
ing all his circumstances into consideration, and then 
to advise him without regard to self-interest. As a gen- 
eral rule, the best plan for a policy-holder is the best 
for the company, and also for the agent. If the agent 
talks nothing but ten year endowment, which the poli- 
cy-holder does not need, and which he cannot always 
continue to pay for, after a year or two the latter will 
surrender it and get a paid-up policy, and having been 
disappointed once, he will resolve never again to have 
anything to do with life insurance, and it is not unlike- 
ly he will denounce the business to his friends and 
neighbors as an unmitigated swindle. Doubtless a part 
of this trouble is due to the of&cers of the company in 
I^ot grading the commissions so that it would be as pro- 
fitable for the agent to work on one plan as on another; 
but the fact cannot be denied that a great part of the 
insurance annually effected has been hitherto on unpro- 
fitable plans, simply to get the first commissions. Now 
we hold that an agent should insure a man in such a 
wa5^ if possible, that he will stay insured and will ne- 
ver want to change, but will continue to pay his pre- 
miums year after year as long as they are due. While 
agents should be taught by the companies not to work 
for first commissions only, the people who insure shold 
be urged to keep their policies in force as long as pay- 
ment of premiums is required. 

Agents should avoid Odd Forms of Insurance, 

If the tables of rates limit endowments to five, ten, 
fifteen years etc. , the agent ought not to take an endow- 
ment payable in eleven, sixteen, nineteen, or any other 
odd number of years. Such policies usually require a 
special premium rate to be made, and they arc a source 
of great annoyance in the home office. The same may 
be said of all kinds of insurance not specially author- 



62 INSTRUCTION BOOK 

ized by the company. An agent picks up a circular of 
Another company, containing some peculiar rates of 
children endowments, or some queer kinds of poli- 
cies, and he thinks, " If my company would only adopt 
those plans, how much business I could do !" The 
fact is that the great mass of people who are insured 
have policies on the usual rates, and a much larger pro- 
portion of policies lapse on these odd plans than on the 
regular methods. 

Extravagant Statsments. 

The business of life insurance and the record of the 
companies have been so well known during the past 
tew years, that it is highly important that an agent 
should be very careful in making any statements about 
the future dividends or future progress of the company 
which cannot be substantiated. It may be well enough, 
when asked, to tell what the company has done in the 
past, and to leave the applicant to conjecture the future 
by the previous record. The less he has to say about 
this subject the better, but people will make inquiries, 
and the only way to satisfy them is to appeal to the 
past, or to show that his company will do as well as oth- 
ers have done. The same is true about future business. 
No one can predict what progress any company will 
make during the next few years. Some companies 
which were formerly doing a small and quiet business 
have suddenly entered the front ranks, and others which 
were noted for their prosperity, manifest but little de- 
sire to -obtain new risks. If the policy-holder is con- 
vinced that he will be justly dealt by, he need have lit- 
tle concern about the rest. The same is true about the 
different classes of dividends which are heralded abroad 
is being a wonderful success. Now in all kinds of divi- 
dends three postulates are true : A company cannot 
divide surplus which it has not got ; in order to get 
this surplus the policy-holder must pay it ; and last- 
ly, if one man gets more than his share, some other 
must get less, or it must be made up froyi lapses. Any 
specio^us claim that sOme new arrangement for distrib- 
uting the surplus is going to produce wonderful results 
to the average policy-holder is simply absurd. We 
have spoken thus freely about dividends because the 
extravagant statements made concerning them have 
been the principal cause of disappointment and vexa- 
tion among poHcy-holders and the lapse of their poli- 
cies. We hope that this state of things is passing away ; 
that the time is near at hand when the public mind will 



FOR LIFE AGENTS. 6S 

be 80 ■vrell educated on insurance that all " Great Ex- 
pectations " will be abandoned ; that people will know 
how to distinguish the true from the false, and that all 
agents or companies whose principal stock in trade is 
boasting and extravagant promises, will find their ' ' oc- 
cupation gone. 

Newspaper Criticisms. 

An agent should pay little or no attention to the com- 
ments of the nf^spaper press upon life insurance. Not 
one writer in a thousand understands the science thor- 
oughly enough to give a proper criticism upon any com- 
pany or plan of insurance. Nor should an agent ever 
rush to the editor's sanctum to ventilate his own griev- 
ances, or to traduce another company. That is a game 
which two can play at, and in the end he will injure the 
whole business — the innocent as well as the guilty. If 
a policy-holder in another company imagines himself 
wronged because he does not get suflficient dividends or 
surrender value, an agent should not lend his assistance 
toward making the fact public in the newspapers. This ' 
is the wrong method of dealing with other companies. 

Assessment Insurance. 

This book is intended for agents of regular or old- 
line companies as they are sometimes called. What- 
ever views may be entertained regarding the system of 
assessment insurance whioii has acquired such promi- 
nence during late years, it can never lake the place of 
genuine life insurance, and the agent who represents 
the latter companies cannot, as a rule, undertake to 
advocate the assessment plan. Both reason and expe- 
rience unite in the conclusion that life insurance as a 
business investment must be confined to the principle 
on which the regular companies are conducted. For 
sound business purposes, the corporation undertaking 
to sell insurance must possess a commensurate finan- 
cial responsibility. This principle is universal in 
every department of commercial life. An empty or 
nearly empty treasury, to be replenished by voluntary 
contributions when required, belongs to the sphere of 
charitable associations. Here it may succeed so long 
as the charity is deemed deserving of support. But 
life insurance as a business is controlled by the prin- 
ciple of selfishness. Men will not contribute a moment 
longer to the death claims of others when they find it is 
likely to be unprofitable to themselves. 



64 IKSTR UC riON B OK. 

In the regular company the applicant purchases in- 
surance just as he would purchase dry gooJs or gro 
ceries. With the contracts of others, he has no direct 
concern. In the assessment company on the contrary 
the value of the contract depends directly on the vol- 
untary contributions of others. Features so at vari- 
ance cannot well be advocated by the same agent. 

Unnecessary Expenditures. 

Agents should avoid too great expenditure in getting 
new business. A costly office for One who is juSt com- 
mencing, elaborate furniture and huge gilt signs do 
not always pay. Policy-holders are not feken by any 
such kind of bait. Selling life insurance and selling 
drygoods in a retail store are done on different plans. 
In the former case the agent must go about and hunt 
up his customers and talk the subject to them ; but in 
selling drygoods, the greater the display that is made 
at the shop windows the better. Not one man in a 
hundred or thousand in this country evers comes into 
an office to get insured of his own accord. Some agent 
has presented the subject to him, has talked and 
argued with him, and finally has pertuaded him to 
make an application. The gilt sign did not attract 
him, it was the leaflet put in his hands by the agent, 
and the earnest words which accompanied it. An ex- 
traordinary expenditure and costly adornments of an 
office are apt to excite suspicion in the public. They 
look upon this style and manner of spending money as 
an unfavorable symptom for the policy-holders ; they 
regard it as a weakness or fault of the company, and 
hesitate long before they will commit their funds to 
such a guardianship. Nor are good agents attracted 
toward a company by any such means. They form 
their opinions from the official reports of the State In- 
surance Departments more than from any such sensa- 
tional displays. An extravagant style of carrying on 
the business operates unjustly upon the members of 
the company. A life insurance company is the treasu- 
ry of the hard-earned savings of its members, and not 
a dollar ought to be wasted. But experience has shown 
that it does not pay to get business in this manner. 
The most prosperous companies are those which have 
united energetic measures with economy in expendi- 
tures, while nearly all that have started off with high 
commissions and other evidences of extravagance have 
done little solid business, and now make a sorry dis- 
play in the official reports. 



FOR LIFE AGENTS. 65 



Brokerage. 

Un.ess the policy-holder lives in the vicinity of a 
home office, every premium should be paid to an agent 
who has a direct interest in its collection. By this 
means the company is less liable to have the policy 
lapse than if it were left entirelj' to the judgment or 
inclination of the policy-holder whether to keep up 
his policy or not. In collecting renewals the agent has 
a good opportunity to ask the policy-holder if he does 
not want additional insurance, or if he has not some 
intimate friend who would probably insure, and he 
can leave him some statements respecting the finan- 
cial condition of the company which will strengthen 
this confidence in it, and prevent his policy from laps- 
ing. By the brokerage system all these benefits are 
lost ; it is bad for the company and for the agent. It 
is the fruitful source of much of the lapsed and surren- 
dered business of the present day. The company 
pays a higher commission to the agent for the first pre- 
mium on the condition that all future commissions 
will be avoided. But such policies are usually short 
lived ones, and in many instances the agent persuades 
the policy-holder to change his policy to that of some 
other company for the sake of getting another first 
commission. Such practices tend to degrade the busi- 
pess. One fundamental idea in hfe insurance is per- 
manence, a regularity in paying the premiums as long 
as they are due ; but this coarse leaves the policy-hold- 
er entirely to his own inclinations, and he is apt to 
lose all interest in the company. It injures the agent ; 
he should accustom himself to look upon the renewals 
as a part of his own property, and take a pride in hav- 
ing them paid from year to year. 

Rebate. 

This is an evil which has grown up during the last 
few years among some agents, owing to the excessive 
competition they have to contend with, and it has a 
very pernicious influence on the business. The prac- 
tice of giving a part or the whole of the first commis- 
sion to the insured in order to induce him to take a 
policy is what no honorable agent will allow. It de- 
ranges the business. If a man wants insurance enough 
to pay his premiums promptly during life, or a series 
of years, he can pay the whole of the first premium ; if 
he will not pay it, what dependence is there to be 



66 INSTRUCTION BOOK 

placed on liis implied promise to pay the renewals ? It 
injures the success of other agents. If such a practice 
is once commenced and openly proclaimed in any 
town or city, other agents will have to make the same 
terms or lose some of their business. An agent who 
begins to cut under in this style will find other agents 
combining against him to injure his company, and he 
will not be able to accomplish much. It is a confession 
of inferior capacity in an agent ; it shows that he can- 
not succeed in the regular waj', and has to resort to 
some such underhanded means. If an agent hoaestly 
earns his commissions he is entitled to them, and he 
injures himself and gets a bad name among his fellow 
workers if he does not insist upon obtaining them. 



Intemperate Men. 

An agent should never attempt to insure the life of a 
man who is intemperate or is given to occasional ine- 
briety. Such people usually live only about one third 
as long as strictly sober men of the same age, and the 
risk is so great that no respectable company will know- 
ingly issue a policy to such an applicant. The words 
of most policies read that if the assured shall die by 
intemperance or delirium tremens, the policy shall be 
void, but even partial intemperance brings with it a 
host of diseases, any one of which may suddenly carry 
off the victim, and the good-natured family physician, 
anxious to keep on good terms with the family of the de- 
ceased, will generally certify that he died of brain fever 
or apoplexy, or anything else than intemperance ; and 
too often his friends will confirm the doctor's profes- 
sional opinion on the subject. Let such men alone. 
If it once gets about that an agent is insuring such a 
class of risks, sound and healthy men will avoid his 
company. 

Leaflets and Premium Tables. 

An agent need not make a practice of giving away 
the leaflets and prospectus of the company to every 
one with whom he converses on insurance. As a gen- 
eral rule they are immediately thrown aside with hard- 
ly a passing glance, like all other advertising matter, 
and only a very few persons will take the trouble to 
notice them. But if the man entertains any particular 
objection to life insurance, and the agent has a leaflet 
which precisely meets his case, it is advisable to pre- 
sent him with one and urge him to read it. 



FOR LIFE AGENTS. 67 

To the mass the prospectus is a mysterious and 
unintelligible document which no pains or scrutiny can 
unravel. Again, as a rule, not one in a thousand as- 
sures from the influence of a prospectus alone. One 
of the most— perhaps the most— successful canvassers 
of past times never gave a prospectus to any assurer, but 
simply wrote the amount of premium the proposed pol- 
icy would cost, on a slip of paper. As this gentleman 
remarked to us, the assurer did not want a whole book 
full of tables ; all he wanted to know was, what it would 
cost him to assure a specific sum, at his present age, 
on a certain table ; beyond that information only be- 
came confusing. — Phjup Sayle, Jk. 



68 INS Tli UCTION B OK, 



CHAPTER YII. 

CHOOSING A COMPANY. 
Age or Size of a Company. 

In years gone by the rivalry of companies induced 
vigorous discussions concerning the relative advantages 
of insuring in old or new, large or small cori^oratious. 
But is the existing condition of the business, compara- 
tivily little stress need be laid on such differences^ 
There are now practically no new life companies doing 
business in the United States unless such as are en- 
gaged in industral insurance may be so regarded. All 
have long since passed their probationary period and 
have established themselves on foundations which can 
only be disturbed by mismanagement. Nor is it likely 
that for some time to come, at any rate, there will be 
any further additions to the r-mks under existing laws. 
The requirements of the leading states are so exacting 
in the matter of legal reserve, that no new comi>tiny 
could hope to compete successfully with those already 
established. The distinction between large and small 
companies may still be drawn, but it is a discrimina- 
tion which is relative rather than absolute. The funds 
of even the smaller companies would have been deemed 
large accumulations, before the business laad assumed 
its present mammoth proportions. 

In so far as age is concerned all have long since 
thoroughly adjusted their machinery to the work, all 
have long since passed that critical stage of a new 
company when the expense of establishing a business 
draws heavily on the current funds. The subsisting 
contracts of all are approximately uniform in respect 
to their duration. In regard to size it is enough to 
say that while the mammoth institution may boast the 
superior advantages of its great machinery, the smaller 
in turn may point to its greater facility for the exercise 
of personal oversight. 

As things now are, the chief advantage which one 
company can claim over another must be such as re- 
sults from the character and ability of the manage- 
ment. The choice must be based on the men in con- 
trol, rather than on the mere age or assets of the 
institution. The judgment must be predicated on the 



FOR LIFE AGENTS. 69 

quality rather than the mere quantity of the business. 
These are matters about which the average apphcant 
for insurance cannot well inform himself. But, fortu- 
nately, the generally solid character of the companies 
themselves renders this less important. 

The question must concern the character of the in- 
vestment, aud of the membership, more than mere 
quantity. In short, wise and skillful conduct of af- 
fairs is the consideration of chief importance. ; 

Mutual, Mixed and Stock Companies. 

The three generic classes into which all life compan- 
ies may be divided are : 

Mutual companies, which have no capital stock as a 
basis, and whose surplus premiums are wholly divided 
among the policy-holders. 

Mixed companies, in which there is a capital stock, 
usually of S100,000 or more, as a basis upon which the 
company was started, and upon which a stock dividend 
is paid to the shareholders. 

Stock companies, with a large capital stock as a basis, 
and which pay no surplus to policy-holders, but issue 
policies at reduced rates of premium. 

Without discussing the merits or disadvantages of 
any one of these classes, we shall simply set forth the 
claims which each presents to the pubhc. 

In regard to the first two of these classes there is 
practically but little difference in the advantages they 
offer. About the only difference between them is the 
$100,000 or more capital stock as a basis, which is lost 
' sight of when the assets amount to a few millions. Some 
mixed companies which are well managed confer quite 
as large benefits upon the insured as others which are 
purely mutual. 

Some of the oldest and largest companies in this 
country were started without a dollar of capital, and 
solely through the energy, popularity and rectitude of 
their officers, their assets are now numbered by tens of 
millions. For a number of years past, the legislature 
many of the States has prevented any new company be- 
ing put into the field with less than $100,000 capital, 
and some of the mixed companies have become mutual 
by retiring their stock. 

In choosing a company, the distinction between mu- 
tual and mixed companies should have very little weight 
with the agent ; he should look more carefully to other 
things— its officers, management, etc. 

In regard to stock companies, the case is somewhat 
different. Some fifteen or twenty j'^ears ago when in- 



70 INSTB V JTIO N BOOK 

terest rates were mucli higher than now and there was 
no apparent prospect of any serious reduction, a strong 
inducement was offered for the organization of stock 
companies for the sale of insurance at reduced rates of 
premium. The capital stock was assumed to be ade- 
quate to meet the excessive expenses involved in 
establishing the business without creating a deficiency 
in the reserve, while the low rate of premium would be 
equivalent to a dividend in advance and fully compen- 
sate the policy-holders for the dividends which they 
would receive under the ordinary mutual and mixed 
systems. It was claimed too as an additional advan- 
tage that the premium was a fixed sum, and the insured 
could always know the precise amount of the payments 
which he must make. It was further urged that a cor- 
poiatiou conducted to make profit for its stockholders, 
on business principles, could be run more cheaply and 
efficiently than the others. 

On the other hand the mutual and mixed offices con- 
tended that their systems furnished insurance nearly 
at cost, and that their larger premiums insured greater 
security. But with a fall in interest-rates the in- 
ducements to organize stock companies disappeared. 
As a consequence nearly all the existing companies 
belong to the mutual or mixed class, and the question 
of their respective merits is one of minor importance. 

Character and Standing of the Officers. 

This is the most important point for the agent to ex- 
amine, but unfortunately it is the one which is usually 
the most neglected. It is the official staff of a compa- 
ny which gives it its standing, and unless their charac- 
ters, business qualities and professional skill will bear a 
rigid inspection, an agent is perfectly safe in looking 
somewhere else for employment. 

Now an agent, before he accepts an agency, has a 
large number of companies to select from, and it is his 
own fault if he does not choose one which is properly 
managed. It is not enough to say that any company 
will do if it pays high commissions. High commissions 
are sometimes the penalty which companies, or rather 
the policy-holders, have to pay for bad management or 
want of public confidence. 

It is not so very difficult for an agent to learn the 
truth about the officers of a company. By making the 
necessary inquiries in the place where the company is 
located, all the necessary information can be had. If 
he was going to deposit his own money in a bank, he 



FOR LIFE AGENTS. 71 

would probably find oiit something about its standing 
and credit. The same rule applies with still greater 
force to an agent. It is a duty which he owes to those 
whom he insures. He should not ask a man to pay 
money into a company unless he is satisfied that it will 
be taken proper care of, and when any of his appli- 
cants ask him about the standing of the officers ha 
ought to be able to give them a satisfactory and truth- 
ful answer. There are companies enough whose offices 
answer the description given above, and no honorable 
and trustworthy agent need fail of finding one which is 
fit to be trusted with the funds of policy-holders. 

Ne-w Plans of Insurance. 

An agent should not place too much dependence 
upon new plans and features. A new plan may be 
attractive, or may be an improvement, but it cannot 
be depended upon to get business. A man buys an 
overcoat because he needs one to keep him warm. He 
does not often buy one just for the sake of getting one 
of a peculiar style or cut. It is so in life insurance ; a 
man insures for compensation in case of death, not for 
the sake of some peculiar idea. If he really wants in- 
surance he may choose the new plan, but if not, the 
new feature will be hardly any temptation to him. 
» Nearly all new plans can be reduced to three classes : 

1. Biff event meiJiods of paying the premiums. If a 
man has a ten premium life policy he must pay a 
larger annual premium than if the payments were con- 
tinued during his whole life ; the more premiums he 
pays the smaller they will be on the same amount of a 
life policy, and vice versa; just like filling a measure 
with apples, the larger the apples the less number will 
be required. In this matter the agent should clearly 
understand the effect which large and small premiums 
have on the amount of insurance actually obtained. 

2. Different methods of returning the surplus. Here there 
is more room for misunderstanding and deception. A 
company cannot distribute surplus which it has not got, 
and it is absurd to suppose that by any particular plan 
each one of all the policy-holders in a company will get 
a larger amount of surplus by one plan than by ano- 
ther. A new patent or copyrighted arrangement for 
computing surplus is usually a method of robbing Peter 
to pay Paul. 

3. Different privileges and restrictions. The gen- 
eral tendency of companies is to allow policy-holders 
many privileges which were formerly denied them. 



72 INSTRUCTION BOOK 

How far this letting down the bars is advantageous we 
do not decide. Travel and residence in unhealthy 
countries, and occupations which tend to shorten life , 
may be necessary for some men to support themselves, 
and some companies see fit to charge such policy-hold- 
ers an extra rate for the extra risk incurred. But since 
some companies hold out these "liberal features " as 
special inducements to policy-holders, the agent should 
give them a proper examination. 

Experience has proved that a new plan or a new fea- 
ture may be a good thing ; but some companies with 
several new plans have done little business, and others 
with no new features are among the most prosperous 
in the country ; and therefore in choosing a company 
an agent should consider all these specialties as of 
little consequence. There are other qualities of far 
more importance. 

Methods of Doing Business. 

Every company of any prominence has some peculiar 
ways or methods of its own in the management of its 
business, depending entirely upon the ideas and indi- 
viduality of its oflScers. The administration of some 
companies is cod ducted on the principle that they must 
get business at any cost; applications must flow in by 
every mail, the medical examiner must let in all who 
can show a reasonable probability of living, and the 
agent's ability is gauged by the amount of insurance 
obtained. Expenditures are of no account, for to make 
money the company must spend money. After a while 
such companies wake up to a consciousness that this 
does not pay. They find that their policies are short 
lived, and their ratio of death-claims is great. Then 
comes a spasm of economy : expenses are cut down, 
agents' contracts are changed, less insurance is done, 
and the company settles down to a conservative method 
like those companies which they so much denounced 
for their old fogy traits. 

There is another extreme : A company may be so 
very conservative that it never succeeds ; its plans of 
insurance may be faultless, its officers may be men of 
spotless reputation and undoubted honesty, the affairs 
of the company may be carefully managed, but it never 
grows very fast. Agents do not like to work for it ; 
they leave for other more wide-awake companies, and 
it does not prosper. The trouble here is that the com- 
pany is not managed on correct business principles. 
A want of liberality to agents, of energy on the part of 



FOB LIFE AGENTS. 73 

Ihe officers, and a failure to adopt such methods ol 
winning the favor of the pubUc have caused this state 
of things. What was expedient ten or fifteen years 
ago is passe now. The officers have not the tact to 
adapt themselves to the changes which have been going 
on, and the company falls behind. 

An agent should make up his mind that, next to his 
own energy and perseverance, his success will depend 
greatly upon the views which the president or manager 
of the company takes of the business ; and if the latter 
is not adapted to his place, or if his views are absurd 
or obsolete, his own career with the company can never 
be a profitable or an agreeable one. 

Reputation of the Company with Policy-holders. 

A company should have a good reputation among 
its own policy-holders. If they are dissatisfied with 
the company after having been insured in it for several 
years, then there is good reason to examine their objec- 
tions. One way of looking at this is by examining the 
State. Insurance Keports, and to keep posted by reading 
rehable insurance journals ; but outside of journals 
devoted strictly to insurance the newspaper opinions 
of companies are worth little or nothing. 

Past History of the Company. 

Thanks to the American system of publicity, the past 
history of almost any company doing business in the 
Unitsd States can be pretty accurately known. The 
Insurance Reports are accessible to all, and in them 
we find the complete statistical history of all the impor- 
tant companies. There is no excuse for an agent to 
say that he had no opportunity to investigate the com- 
pany before he became connected with it. This is 
knowledge which it is absolutely necessary for him to 
have before he can meet the objections of the agents of 
other companies. 

Agents should -wrork only for Good Companies. 

If this chapter has been properly understood, we 
believe we have made it clear that the agents have the 
reputation and standing of the life insurance compa- 
nies in their hands. If agents would never lend their 
services to companies of questionable reputation, nor 
to those whose chief attraction is the excessive com- 
missions they ofi^er, if they would satisfy themselves 



74 INSTRUCTION BOOK 

that the men whom they insure would never look back 
with regret to the time when they first listened to the 
persuasive voice of the solicitor, if truth, frankness and 
honor always preceded the application, and confidence, 
satisfaction and good faith always accompanied the 
policy, then a reform would be begun which would be 
thorough and permanent. 

A company in this country can no more progress 
without agents than a general can fight without sol 
diers ; and if agents understood their importance and 
value, so as to insist upon good companies or none, one 
great improvement would be accomplished. Then 
every choice of a company would be an emphatic in- 
dorsement of its ofi&cers and plans, and every rejection 
would be an equally significant condemnation of them. 
Every good agent should feel that he has a power 
which has never yet been used to its full extent, and 
which, properly directed, would be one of the greatest 
influences for good which can be developed in life in- 
surance. 



FOB LIFE AGENTS. U 



CHAPTER Vn. 
THE COMPANY. 

It is highly important that an agent should clearly 
understand his relations with each of the officers of the 
company, as a great part of his success depends upon 
his obtaining their confidence, and without their aid 
and co-operation his labor will be apt to prove a failure. 

If his field is in the immediate vicinity of the home 
office, he has an opportunity to know them at least by 
reputation, and can judge somewhat of their ideas of 
business ; if he is stationed at a distance he is usually 
under the authority and direction of a general agent or 
manager of agencies. In the latter case, the decisions 
of the manager are final, and he should look to him for 
instructions. What has been said in a previous chap- 
ter about being posted in regard to his own company, 
includes all the knowledge he can avail himself of re- 
specting the business quahfications and reputation of 
^each of its officers and their general management. 

Tlie President and Vice-President. 

The president is the highest authority in the compa- 
ny. Upon him devolves the decision of all the more 
important questions connected with its management. 
In many cases, however, the more active control falls 
upon the vice-president, and then all that is here said 
of one is equally applicable to the other. All questions 
of contracts, the appointment of general agents or ma- 
nagers, and sometimes of solicitors, the assigning to 
them their special territory, the making of purchases 
for the company, the investment of funds, and all the 
more important duties, devolve upon him. This is a 
position of no ordinary importance, and it requires the 
rarest executive ability and great general information. 
If the agent has any business with him, it should be 
conducted with the most cordial frankness and respect ; 
the agent should always desire to sustain the reputa- 
tion and add to the prosperity of the company, and 
snould render prompt obedience to all of its com- 
mands. The president, having larger experience and a 
general oversight of many agents, it is to be expected 



76 INSTRUCTION BOOK 

that his opportunities for judging of the expediency of 
measures would be superior to that of solicitors, whose 
observation is usually more limited. It may be a spur 
to the ambition of agents to know that the presidents 
of some very successful companies commenced the 
business of life insurance as solicitors, and after getting 
a thorough knowledge of its details, organized compa- 
nies of their own and are conducting them on sound 
business principles. 

The Secretary. 

The secretary is the organ of communication between 
the company and the outside public. It is a part of his 
duty to prepare contracts for agents, to take charge of 
the correspondence of the company, and such details 
as require a constant supervision. It is highly import- 
ant that all business matters which are transacted be- 
tween the agent and the secretary should be of a 
friendly nature. He is, as it were, the spokesman of 
the company ; it issues its orders and performs its offi- 
cial acts through him, and his position is one of re- 
sponsibility and influence. 

In corresponding with any of the officers an agent 
should be as definite and explicit as possible. Where a 
man has from twenty to fifty letters to answer every 
day, he is apt to become impatient if his time is taken 
up in attending to unnecessary details of the agency, or 
in reading the opinions of an agent expressed in an un- 
intelligible manner. If a solicitor is immediately re- 
sponsible to a general manager, then all his correspond- 
ence should be with him, unless it is of such a charac- 
ter that it needs the attention of the home office. But 
in all cases the agent should express his wants and 
opinions with brevity and simplicity. 

The Medical Examiner. 

In the home office of every company a medical exam- 
iner is in attendance every day to examine parties who 
wish to insure. As their examinations are conducted in 
private, and reported immediately to the officers, the 
agent has little to do with him. His duties being 
strictly of a scientific nature, he does not even know 
who the agents are. But when agents are stationed at 
a distance from the home office, they have medical ex- 
aminers appointed in the towns where they are located, 
and often the agent has something to do in recommend- 
ing them to this position. Or, perhaps, on the agent 



FOR LIFE AGENTS. 77 

having obtained an application, he goes to the nearest re- 
gular doctor and gets him to examine the applicant. 
The position of a medical examiner in such a case is a 
peculiar one. He knows that he is indebted to the 
agent for the fees of examination, and on his opinion of 
Xhe health of an applicant will depend the commissions 
of an agent. When this occurs, it may be hard for him 
to maintain a perfect independence, and to decide whe- 
ther to reject a risk for which the agent has labored 
long and earnestly, or to state the facts which he is 
confident will lead to his rejection. But the company 
cannot prosper unless the medical examiner is perfectly 
independent of the agent, and decides all these ques- 
tions in a disinterested manner. The company pays 
for a strict and impartial examination, and is entitled to 
it. What is the agent's duty under such circumstances ? 
He should never attempt directly or indirectly to influ- 
ence the medical examiner. He should neither suggest 
certain replies nor question any of his conclusions. The 
medical examiner should confine his sources of know- 
ledge strictly to the application and his personal inspec- 
tion of the candidate for insurance. When the applica- 
tion is completed, the agent has nothing more to do 
with it, as far as the medical examiner is concerned, noi 
should he receive any information from the agent on the 
subject of the health of the applicant. All interference 
of this kind is unprofessional. 

The Manager of Agencies. 

The manager of agencies ought to be a man of great 
business tact, experience, and an unblemished reputa- 
tion. His knowledge of the practical working of a life 
insurance company should be such that he can decide 
immediately upon any scheme, proposal or plan of busi- 
ness within his jurisdiction as to whether it is in har- 
mony with the best interests of the company or not. As 
this officer has usually a large extent of territory, and is 
expected to make himself familiar with the wants and 
the working force in every part of it, he comes more in 
contact with the agents than any other member of the 
company. If an agent needs any information, such as 
the advantages or disadvantages of the special features 
of other companies, or the best method of operating 
upon certain classes of individuals, he should apply to 
the manager. It usually happens also that the agent or 
solicitor is directly responsible to him as his employer 
instead of the other officers of the company. Wh^n 
this is the ease, all that has been said in regard to the 



78 INSTBUCTION BOOK 

relations of the agent with the president or secretary 
will apply here. 

Devotion to the Company. 

An agent should devote his whole services to his own 
company. He should feel that its honor and reputation 
are in a great degree entrusted to his keeping and con 
nected with his interest ; that while he is laboring to 
increase its assets and the number of its policy-holders, 
its good name and reputation are becoming a tower of 
strength to him, and its prospects for affording him a 
more ample revenue are daily increasing. "Without this 
feeling of allegiance he will be almost sure to fail. Whe- 
ther he is at work for a young or an old company, he 
should always be able to show that there are many qual- 
ities about it which make one of its policies a desirable 
investment, and to do this he should not only have per- 
fect confidence in it, but should master all that is said 
in reports and charts about it. 

His devotion should not only be earnest but lasting. 
Having once connected himself with a good company, 
he should not think of changing without sufficient rea- 
sons. If, after a few months' trial, he is successful in 
procuring new business, he will probably have several 
invitations to work for other companies. Another, he 
is told, pays higher commissions or has more assets, or 
distributes a larger ratio of surplus, or has some new 
plans which are peculiar to it, and which will procure 
a vast amount of business. It is natural for an agent 
to desire to improve his condition ; but before he 
yields to any such entreaty he ought to ask himself se- 
riously and sincerely whether it is best to make a 
change. If he has carefully complied with all the 
hints given in the last chapter about choosing a com- 
pany, and has acted with due deliberation, there will 
be little or no desire to change. 

Influence of Agents on a Company's Reputation. 

The company is indebted to the agents in a great 
measure for the reputation it has in a community. It 
is not sufficient to say that the company picks out its 
own agents, who act on their own responsibility. The 
people will hold the company responsible for their 
conduct. An agent goes into a town, and by misrepre- 
sentation and deception succeeds in doing a large busi- 
ness for a few months. After a while the promises 
which he made in behalf of the company are not ful- 
filled by it, and the policy-holders are discontented and 



FOB LIFE AGENTS. 79 

let their policies lapse, or at least they never speak 
favorably of the company they are insured in. Those 
who stop paying their premiums always have a grudge 
against it for sending out such an agent. They look 
upon him as a proper representative of the company 
for whom he is employed. 

It may be that the officers are partly responsible for 
this state of things ; perhaps they have not sufficiently 
cautioned their agents to avoid all misrepresentations 
or exaggerations ; but this will never excuse an agent 
from feeling that the honor and prosperity of his com- 
pany are inseparably connected with his own. 

Contracts with the Company. 

The contract which an agent makes with a company 
is usually limited to a certain territory, and the com- 
missions on all business which he procures. We shall 
not attempt to give any laws or to lay down anj infalli- 
ble rules which ought to regulate the payment of com- 
missions to agents. The companies usually adjust 
them upon the different classes of policies in such a 
manner as suits their own ideas of propriety. 

The contract which an agent make© should be ex- 
plicit and clearly understood by both parties. As long 
»(,s it is in force, the agent should regard it as of the 
utmost importance to his reputation and success that 
it be complied with in all its particulars. 

Commuted Commissions. 

The agent's renewal commissions are his own prop- 
erty, subject to the terms of the contract by which he 
accepted the agency. It often happens that an agent 
wants to sell out his right in the future profits of his 
business, and the question arises, what is their present 
value, or how shall their present value be ascertained ? 
If it were certain that there would be no lapses or sur- 
rendered porcies, the present value of the future com- 
missions could be arrived at very easily. But at present 
nothing in Hfe insurance is more uncertain. There are 
many different things to be examined in determining 
their approximate value. If the company is one in 
which the policy-holders have perfect confidence, then 
the policies will be more likely to be kept in force 
than if the reputation of the company, or some of its 
methods of doing business, were not so satisfactory. 
If most of the policies have been in force several years, 
and the premiums have been regularly paid, then their 



80 INSTRUCTION BOOK 

future continuance is highly probable. If the general 
character of the agent is good, and his business has 
been honorably obtained among rehable men, then 
these circumstances should be considered in the agent's 
favor. Moreover, it should be taken into consideration 
that one is much more apt to keep up his renewals if 
the agent who insured him calls on him for their collec- 
tion than if they are to be sent to the central office by 
mail. 

No definite rules can be given for determining the 
value of this species of property, and companies can- 
not make very liberal terms with agents because of the 
uncertainty whether these premiums will continue to 
be paid. The best terms which an agent may expect 
to get is the present value of them for a f^^w years, ay 
the case may be. 




FOR LIFE AGENTS. 81 



CHAPTER IX. 

THE AGENCY. 

The Field. 

If the agent is commencing tlie business of soliciting 
he will find it advantageous to begin his labors where 
he has a number of acquaintances and personal friends. 
They will listen the more readily to him and be more 
farorably impressed toward his company, and he will 
be far more likely to take applications among them at 
the outset than among total strangers. His personal 
friends will assist him in making new acquaintances 
and in informing him of those who would be likely to 
insure. 

It is a great mistake for an agent to suppose that he 
needs a large field for his exclusive jurisdiction. An 
agent in laying out too much work for himself is apt to 
end in accomplishing little. In every thickly-settled 
community or large town, there are a great number of 
people who are not insured, and who only need to be 
convinced in its favor. It is not the extent of territory 
worked over, but the number of applications, which 
makes the agent's record. When an agent has once 
commenced in a place, and is doing well, he should re- 
main there as long as he is successful. His territory 
can be enlarged as he shows capacity to work it. But 
if a solicitor commences by monopolizing a large field 
at the outset, the company is apt to expect more than 
he can accomplish. In attempting to do too much 
he does nothing thoroughly, and in the meantime he 
is incurring considerable expense in traveling. It is 
like cultivating a large farm with insufficient help, and 
consequently the harvest is small. 

It is equally a mistake for a solicitor to suppose that he 
must have a field which is new, or where the subject of life 
insurance has been little talked about. In such a field 
he will find the people strangers to hfe insurance, and 
consequently harder to convince than if some agent had 
already insured some of the principal citizens. If an 
agent can say " Here is Mr. A. and Mr. B., prominent 
men in this place, and men of good business capacity, 
who would not spend money foolishly, they have their 



82 I2fSTRUCTI0N BOOK 

lives insured to a heavy amount," it will go far toward 
convincing a skeptic of its importance. There is no 
place in the country where all the people are insured 
who can pass examination and who can pay annual pre- 
miums on a respectable sum, and while this state of 
things exists, there is room for one more agent. 

His Headquarters. 

An agent should have his ofl&ce or headquarters in 
some pjfominent town or place where there are wealthy 
men whose influence he can rely upon in advocating 
the claims of his company. In a thickly-settled town 
or city he can see twice as many people in a day as in 
the country, and he can make himself better known to 
them in a shorter time. In such a place he will find it 
easier to start a business. Men in active hfe, who see 
considerable of the world, and who have an opportuni- 
ty of knowing something of the practical benefits of 
life insurance, are more apt to insure than those whose 
circumstances and pursuits are less prominent. 

Insuring Certain Classes. 

Some agents who operate in large cities make a 
specialty of insuring men in certain kinds of busi- 
ness and professions. There is an advantage in this 
which is worth consideration. When the agent is well 
acquainted with men in any profession, he understands 
their general habits, he knows when they are most ac- 
cessible, and what arguments will influence them most ; 
b J making this a study he can get into their confidence 
more easily ; he can say, " I have just insured Mr. So- 
and-So, whom you know, and who is in the same busi- 
ness you are." When an agent gets into a groove of 
this kind, insuring lawyers, brokers, or any class of 
business men, he has an advantage over those agents 
who attempt to take all classes in their nets. 

Should build on a Solid Foundation. 

Whatever is worth doing at all, is worth doing well. 
In commencing his work, the agent should bear in 
mind that it is of the greatest importance to begin 
right and then it will be easy to remain so. He should 
take no steps he will have to retrace, nor begin any wort 
which he will have to undo. In building the East El- 
ver Bridge, the foundation of the piers were laid or 
the solid rock, because the structure is expected to lasi 



FOli LIFE AGENTS. 83 

for all time ; so in establishing an agency, the agent 
should regard it as his life worlj, and act accordingly. 
It is like clearing a farm in a "Western wilderness ; when 
the trees and stumps are removed, and the ground 
brought into a high state of cultivation, the farmer can 
depend upon it for an adequate support as long as he 
lives. 

An agent is laboring for the future ; if successful, his 
renewals will afford him a constant income, and if he is 
careful in selecting his risks and retains the confidence 
of the company, his reward is sure. If he has careful- 
ly followed the precepts given in the preceding chap- 
ters, he has done much toward future success ; and for 
his encouragement hereafter, let him ever remember 
that the best companies and the most successful agen- 
cies are those which were begun right and conducted 
with unremitting energy and correct methods. 

Securing the Influence of Prominent Men. 

One of the most important things connected with 
an agency is to secure the influence and goodwill of 
prominent men in the vicinity where the agent is going 
to work. Some companies adopt this principle on a 
large scale. When they go into a new State, they se- 
iect some of the most prominent men for a ' ' Board of 
Eeference." It is understood that these men have ex- 
am.ined the affairs of the company, or are so thoroughly 
acquainted with it that they are competent to give a 
correct opinion of its soundness and the standing of its 
offieexB. "Without going into a discussion of the ' ' local 
board plan " as such, it is safe to say that men who 
would never think of insuring under other circum- 
stances, will give an agent a patient hearing if his com- 
pany is indorsed by some prominent men in whose opin- 
ions lie has confidence. 

In coming into a town where an agent is not known, 
one of the first things he should do is to get a list of the 
leading citizens who are good risks, and insure as many 
of them as possible. Some of them may be acquainted 
with his company or may be personally known to some 
of the officers, and this will aid him materially. There 
are many men who will not look at an insurance leafl.et, 
or think of taking a pohcy, until they are told that 
Squire A. or Eev. B. or Dr. C. has his life insured. 
Most men are so constituted that they like to have their 
thinking done for them. When some one else in whom 
they have perfect confidence has taken a policy, they 
are ready to do the same. 



«4 INSTRUCTION BOOK 

The minister in every parish has a great influence 
over his flock, and if he can be persuaded to insure, a 
strong point will be gained, since he knows all the influ- 
ential men in his congregation or parish, and can give 
the agent valuable assistance in pointing out those who 
would be likely to take a policy. It is also a good idea 
to persuade the leading members of a church or con- 
gregation to present their minister with a life insurance 
policy, and with a pledge to keep the premiums paid 
during his stay among them. Apart from the good 
such an act might do the agent, it is a simple duty 
which all parishes owe to their spiritual guides if they 
are faithful and deserving. Is there any present more 
acceptable than a life policy, or an endowment maturing 
at the age of sixiy-five or seventy ? If an agent can 
persuade a minister to insure, or his church to insure 
him, both the agent and his company will be tolerably 
well advertised by the operation. 

Owners of factories and foremen in large manufactur- 
ing establishments should be objects of special atten- 
tion. A policy from one of this class will go a great 
way toward introducing the agent to the favorable no- 
tice of the workmen, and when they once hear that 
their "boss "is insured, they will have little or no 
doubt but the company is a safe and prosperous one. 
The same rule will apply to many other organizations. 
If the agent belongs to any society, lodge, or military 
company, he should lose no time in insuring as many 
of the influential members in it as possible. 

This idea of using certain kinds of machinery, such 
as the corporations or organizations which we have just 
described, is one of the most important points in soli- 
citing. It should be the constant question on the mind 
of every agent, " How can I use this influence or that 
organization in building up my business ?" Nothing 
should be left untried which has a fair show of success 
—no honorable means should be neglected to increase 
the business of the company and to get himself in the 
way of taking important risks. There is as much room 
for strategy in soliciting life insurance as there is in mil- 
itary operations ; there are campaigns to plan, and 
there are victories to win in both. As he is the most 
successful general who unites boldness and vigor to the 
application of every scientific discovery which can be 
used in war, so is he the most successful agent who can 
make all the difierent human agencies subserve to in- 
crease his business and the reputation of his company. 

The medical examiner in a ay town or city can give 
an agent a great amount of valuable information about 



FOR LIFE AGENTS. 85 

men — who are the best risks and who would be likely 
to insure. His professional knowledge will enable him 
to tell the agent when is the best time to see certain 
parties, what kind of men they are to approach, or 
what arguments would be likely to prevail with them. 

Other Events. 

An agent should take advantage of every event which 
has a tendency to bring the subject of life insurance 
before the public. If a man dies in the place where he 
is sohciting, and is heavily insured, the agent should 
make this a special argument in favor of life insurance. 
he should find out how large a- policy he had, how 
many premiums he had paid, and theii* aggregate 
amount, and then he can go before the public and say, 
"Here is an instance where a man paid only a few 
hundred dollars, and his widow has now several thou- 
sand paid to her by the company. Here is a practical 
illustration of the business worth of life insurance. If 
she had received this amount from a rich uncle whom 
she had never seen, everybody would have said, ' How 
lucky she has been ?' " If a man dies without any in- 
surance on his life, the agent can say, " That man 
C,ould have been insured a year ago for $5,000 by pay- 
ing only one or two hundred dollars ; but he thought 
life insurance was a humbug, and see how his affairs 
are left, and how his family will be situated in the fu- 
ture." 

If an agent discovers that a gentlemen or any of his 
family are going on a voyage to Europe, or any distant 
country, he should lose no time in offering to insure 
their lives, and should urge the importance of protect- 
ing each other by insurance. Most people look upon a 
voyage at sea, and travel in a distant country, for the 
fii'st time at least, as fraught with no little aanger, and 
they should be more willing to insure than ever before. 

Other family events may have some influence: the birth 
of a sou or daughter may be the occasion of a father's 
taking an endowment policy payable when the child is 
of age. A man just married may sometimes be induced 
to take a poiicy in favor of his wife, especiallj'' if he is 
entirely dependent upon his own income or salary for 
their support. 

Advertising. 

An agent should take every suitable opportunity to 
make himself known, and the company he represents 



86 INSTE UCTION BOOK 

should also be kept prominently before the public. In 
some companies the whole business of advertising is 
placed in charge of one of the officers or employees, 
who selects such channels and takes such measures as 
he thinks proper. But whatever the agent is allowed 
to dp by means of handbills, show-cards hung up iu 
hotels and public places, advertisements and editorial 
notices in the local papers, should be diligently attend- 
ed to. In most places of public resort a handsome 
show-card is always welcome, and people looking at it 
merely to admire its beauty will get some idea of th« 
company. Nothing of this kind should be despised. 
It is rather mortifying for an agent to be asked, " Where 
is your company located ? I never heard of it before." 
But if the company has been well advertised by the 
means which have been suggested, this misfortune will 
not be likely to occur. A great deal of money which 
is spent in advertising is utterly wasted. As a general 
rule, a short local notice which will attract the eye and 
fasten the attention of the reader upon one or two facts 
is the most effectual method. It is more apt to be 
read and remembered than a half-column displayed 
advertisement. But while all these things are useful 
as aids in obtaining business, no reliance should be 
placed iipon them, without personal effort and active 
canvassing. Printers' ink, unaided, wiU not bring in 
the applications, the public is not yet educated up 
to that standard. 

Excelsior. 

Finally, every agent should endeavor to make his 
agency as profitable and respectable as possible. He 
should look upon it as a man looks upon his farm or 
his factory. It is his means of livelihood, and the 
money and labor he spends upon it is so much capital 
invested. He should not only bring it up to a high 
state of cultivation, but should make it an ornament to 
the place in which he lives. In like manner an agent 
should take a pride iu having the best agency and the 
best selection of risks in the place where he is located. 
In everything which is praiseworthy he should strive 
to excel all his competitors. This should be his firm 
resolve. No spasmodic effort, no temporary measure 
will produce this result. It cannot be done in a 
single day or a single year, and the agent should 
take hold of it with the determination to make 
it his life work. It is a great mistake for an agent to 
suppose that he can work in the company a year, and 
the next year transfer aU his business to another, and 



FOR LIFE AGENTS. 87 

get rich by such a system of changes. That is not the 
way in which the great fortunes in hfe insurance have 
been made, or by which the great agencies have been 
built up. 

The Ultimate Record. 

Before conckiding this chapter it may be well to 
show to the young aspiring agent that there are prizes 
to be won in life insurance tournament, as well as 
battles to be fought which the outside public knows 
little about. We should not be justified in setting 
forth the duties, the sacrifices, and the labors of an 
agent without likewise giving some faint glimpse of 
what has been and what can be done by those who 
have shown themselves worthy. Some of the most 
profitable general agencies of our leading companies 
yield a revenue of from $10,000 to $30,000 per annum, 
and nearly' all of this is from renewal commissions. 
The income has been honestly earned, and the business 
has been built up by the hard toil of years of soliciting 
and the successful management of subordinate agents. 

There is no business more honorable when rightly 
managed, nor is there any more sure of reward for cue's 
labor, than a successful life insurance agency. 



INSTRUCTION BOOK 



CHAPTER X. 

ACCOUNTS WITH THE COMPANY. 
Monthly Statements. 

A Good agent will be careful to keep accurate ac- 
counts of all the business transacted, premiums re- 
ceived, and expense incurred in his agency. In order 
to do this successfully he should be a man of correct 
business habits, and have some practical knowledge of 
bookkeeping. The company furnishes, him with blanks 
to make up his monthly statements of new policies is- 
sued during the month, the renewals falling due, toge- 
ther with those held over from the previous month for 
want of payment. It is of great importance that this 
statement should be correctly prepared, and ttiat all 
the accounts should be made to balance. The sum of 
the premiums on renewals and policies returned and 
those on hand, together with the expenses charged and 
cash remitted, should equal the total amount of premi- 
ums charged in the account. Whenever any policy or 
renewal has been retained in the hands of the agent as 
long as the rules of the company allow, without the 
premiums being paid, it should be promptly returned to 
the company for their disposal . 

Office Books, etc. 

An agent should have a register of all the policies 
taken at his agency, and this book should be so ruled 
and arranged that it will show the number, date, pre- 
miums, commissions, etc. , of each policy taken, and 
give a general epitome of all the business done. It is 
a very important adjunct to the office, as it enables the 
ao-ent to tell what premiums arc falling due each month, 
so that he can send notices to the policy-holders a suffi- 
cient number of days in advance, and also when to re- 
turn pDUcies not taken or renewals on policies which 
have lapsed. He should also keep an expense book in 
■which all the company expenses at his agency are noted, 
such as medical examinations, traveUng and office ex- 
penses, etc., and vouchers for all expenses incuiTcd 
should be taken if required by the company. 



FOR LIFE AGENTS. 89 

He should also keep a supply book in which he re- 
cords all the supplies received and the disposition made 
of them. All the letters aud correspondence relating 
to his business which he receives from the company or 
other parties should be carefully indorsed and filed. As 
these books are the property of the company, they 
should be open to the inspection of the officers when- 
eTer they are demanded. 

In writing to the home office respecting any particu- 
lar policy, the number of the policy should always he 
given in preference to the name of the policy-holder, and 
all references to different policies should be made in 
this manner. A strict adherence to this rule will save 
an immense deal of labor on the part of the clerks in 
the home office. 

Careless Agents. 

Some agents have such loose business habits that they 
seldom or never prepare a monthly statement correctly, 
and when it is sent to the home office the mistakes or dis- 
crepancies are discovered, and the secretary has to re- 
turn it for correction or write for explanations , and a 
whole month or more elapses before it is rectified. 

When the president or some of the officers of the 
company visits such an agent, everything is in confu- 
sion ; he does not know how his accounts stand, he is 
doing such a business that he has not had time to at- 
tend to these trivial matters, and the consequence is, 
that several days must be employed in going over his 
accounts and putting them in order. This trouble and 
confusion is entirely unnecessary. The time of the of- 
ficers of the company is extremely valuable, and it is 
putting the company to an unnecessary expense, which 
a little attention and correct bookkeeping would have 
saved. An agent's reputation as a man of business de- 
pends a great deal on such things as these. If he is 
so much engrossed in getting new business that he can- 
not Ijeep his accounts straight, or has not sufficient 
knowledge of bookkeeping and has no time to acquire 
it, he should employ a competent clerk to do it for him. 



90 imTB UCTION BOOK 



CHAPTER XL 
SOLICITING. 

In this chapter we propose to give some general ideaa 
of soliciting, and as many particular ones as may be 
deemed expedient. But in giving these directions and 
precepts, we wish it to be understood by the reader that 
we do not warrant them to apply to every case which a 
solicitor may have, nor do we think it is possible to 
present any infallible rules or specific arguments for so- 
liciting, any more than it is to give infallible directions 
how to make a fortune by speculating in Wall Street. 
Men are so different in their circumstances, their hab- 
its, of thinking and acting, that seldom can any two bo 
won over by the same arguments. Soliciting is a busi- 
ness which must be conducted entirely according to 
the circumstances of the case, and the agent must be 
the sole judge of the propriety of the means to be 
used ; and whatever directions and arguments are here 
given, are meant to be employed when the circum- 
stances are such as to justify their use, and not other- 
wise. 

If a doctor knows the properties of a hundred differ- 
ent kinds of medicine, and their effect on the human 
system, this knowledge is of no use to him in any par- 
ticular case, unless he knows with what disease the pa- 
tient is afflicted. If the patient has the smallpox it is 
useless to prescribe medicine suitable for the typhus fe- 
ver. If the doctor comes to his bedside, and without 
looking at him says to himself, ' ' I have a hundred dif- 
ferent kinds of medicine, every one of which is a spe- 
cific against some disease, and of course I can cure 
this, therefore it is of no use for me to feel of his pulse, 
or to look at his tongue, or to learn any of his symp- 
toms — if one medicine does not produce the desired 
effect another will, and I have only to experiment on 
him till he gets well " — would such a dt)ctor be a very 
successful practitioner ? No. That is not the way a 
physician goes to work. He makes a careful examina- 
tion of all the external indications of disease, asks him 
a few simple leading questions about his symptoms, 



FOB LIFE AGENTS. 91 

and in a short time be has satisfied himself what is the 
ailment and what remedies are needed. 

In the same way an agent should find out as nearly as 
he can what arguments he will have to produce and 
what objections he will have to meet before he asks a 
man to insure. He should learn as nearly as possible 
what his means are, and how much he can probably af- 
ford to pay on a policy. It should be done before the man 
is asked to insure for any particular amount or on any 
definite plan. If the agent suggests too large a premi- 
um he will frighten him away ; if too small, the agent 
does a large amount of work gratuitously. He should 
learn, if possible, his age, so that he can tell precisely 
how much premium will be required. If the party is 
already insured, the agent would do well to find out in 
what company, and if the policy-holder is satisfied with 
the bargain, he should show the resemblance between 
that company and his own, and any circumstances of 
superiority can be pointed out ; care should be taken 
to keep him satisfied with what insurance he has, to in- 
duce him to take more. 

If he is a careful, cautious man, one who builds en- 
tirely for the future, then the agent may explain how a 
policy in a responsible life insurance company is ex- 
actly suited to his wants ; that the payment of policy 
claims and the stability of Hfe insurance companies are 
as certain as any corporations. 

In some way or other almost every man can be 
reached by arguments in favor of life insurance. Some 
are so easily pleased with the idea that they are making 
certain provision for their families, that they will readi- 
ly insure for a large amount ; others must see money in 
it, and will not take a policy unless they are sure of get- 
ting the best of the bargain ; others, still, will insure 
because some one else has, and these peculiar reasons, 
motives or inferences which lead men to insure, cannot 
be seen at a glance, but have to be discovered by dili- 
gent inquiry and cautious observation. 

Introductions. 

Among a certain class, especially prominent business 
men, in our large cities, an introduction either in person 
or by letter is often necessary to produce a proper impres- 
sion and to induce them to give the subject that degree of 
thought which is required to secure an application. An 
introduction is a virtual pledge made by the party pre- 
senting the stranger, that the latter is a person worthy 
of confidence, and it also carries with it an obligation on 



32 INbTEUCriON BOOK 

the part of him to whom the man is introduced to lis- 
ten respectfully to what he has to say. When an agent 
comes as a perfect stranger to a man and asks him to 
insure, the latter must be convinced that he is worthy 
of confidence, and that the company he represents is 
entirely trustworthy. There is no method of doing 
this so quickly as by having an introduction from an in- 
fluential friend. Substitutes for this may be adopted, 
such as circular letters signed by influential citizens 
who have obtained insurance, or others well known for 
their reputation. The end which the agent seeks to ac- 
complish is to make himself favorably known to the 
public or to particular individuals, and to bring his com- 
pany into notice, and any honorable method which sug- 
gests itself to him should be tried. 

A Suitable Opportunity. 

This is an important point in soliciting. It will do 
no good to go a trout fishing when the streams are cov- 
ered with ice, nor to hunt wild ducks around the north- 
ern lakes in midwinter. There is a certain time and 
place most suitable for accomplishing everything, espe- 
cially in life insurance. A commercial traveler knowa 
that there is a certain time in the year when spring 
styles of goods will sell, and a time when only the fall 
and winter styles will be looked at. It is somewhat so 
in insurance. If a farmer has just sold his crops, if a 
merchant is doing a thriving business, or if a brokei 
has just made a fortune by speculating in stocks, then 
here is an opportunity for the life agent which is too 
good to be lost. Let the agent look after these men 
without delay. Let him select such hours of the day 
when he can call upon them without putting them to 
inconvenience, and then present the claims of life in- 
surance as earnestly as the nature of the case will allow. 
Under all circumstances the conduct of the agent should 
depend upon his innate sense of propriety, and the 
greatest care should be taken not to say or do anything 
which will repel a man from taking a favorable view of 
the subject. 

Stating the Business. 

In soliciting insurance the agent should always bear in 
mind that he has an article for sale, which in all proba- 
bility the man really needs but does not desire, and his 
first business and perhaps the whole of it is to convince 
him that he does need it. To commence talking about = 



FUR LIFE AGEXTS. 93 

any particular compan3% or new plan of insurance, is to 
begin at the wrong end. It takes for granted that the 
man wants insurance, but does not know where to find 
it or what kind, which is not very comphmentary to hia 
self-esteem. Life insurance as insurance, or an invest- 
ment, and not as a speculation, should be clearly pre- 
sented ; its great claims upon the public, and especial- 
ly upon individuals who have families dependent upon 
them, and whose death would leave them without ade- 
quate support, should be forcibly urged, with a due re- 
gard to the circumstances of the individual and with 
perfect fidelity to the company. All information asked 
should be correctly given, for any questions will show 
that the listener is taking an interest in the subject, and 
all necessary explanation should -be made, care being 
taken to go as little as possible into the technical part 
of the subject, unless the education and mental qualifi- 
cations of the man are such that these things are inter- 
esting to him. Clearness and simplicity of diction and 
a quiet earnestness of manner are qualities most effect- 
ive in producing conviction. 

Arguments should be adapted to his ConditioiL 

AJl arguments, appeals and illustrations should be 
adapted to the condition of the man the agent wishes 
to insure. It is folly to urge the same arguments upon 
a plain farmer which would be effectual with a wealthy 
merchant or prosperous banker, and vice versa. The 
former may want insurance at its cheapest rate, and is 
satisfied with that form which gives the greatest possi- 
ble insurance with the least expenditure of money, 
while the latter, taking a business view of the case, may 
think of taking a policy simply as an investment. 

There is hardly any subject or characteristic of life 
insurance which cannot be reasonably and clearly illus- 
trated by fire insurance, and this is one of the easiest 
methods of meeting some of the common objections 
urged against it. If a party complains that the ex- 
penses of life companies are too great for the premiums 
paid, the agent can reply that the average expense of 
fire companies is thirty per cent., the dividends to 
stockholders is ten per cent., and only sixty per cent, of 
the premium is usually taken to pay the current losses 
during the year. If a man cannot understand why a 
company should require a premium larger than the an- 
nual cost of insurance and necessary expenses, the 
agent can state the matter as follows : Suppose a 
house is erected on a vacant lot, far from any other 



H INSTRUCTION BOOK 

dwellings, and is insured against fire for ten years. At 
the end of one year a factory is set up on one side of it, 
a. year or two after a mill is placed on another side, and 
in a short time the vicinity is built up with wooden 
buildings to such an extent that it is almost certain that 
the house will be consumed in a few years. Now if the 
owner of the house wants a uniform rate of premium 
during these years of increasing risk, then the premium 
of the first few years must be larger than is sufficient to 
carry the annual risk, in order to provide for the in- 
creased danger which is to come, and the company must 
set aside a sum each year which will be sufficient to 
save the company from loss, and paj' the current ex- 
penses. In an insured life, the danger of death or loss 
to the company increases every year. According to the 
tables it is considered certain that every person will die 
at the age of 100 or less ; at the age of 39 the danger 
is about one per cent., at 54 it is two per cent., at 60 
it is three per cent., and at 64 four per cent., and so 
on till we reach the age 99, when it is one hundred per 
cent. A uniform rate of premium through life makes 
it absolutely necessary, like the fire policy illustration 
given above, that the premium during the first few 
years, and the assumed interest thereon, should be 
large enough to make up for the additional risk of the 
future. 

The agent should always be on the watch to discover 
what kind of arguments will have the most effect. To 
a farmer he might show how a policy on a life would 
pay off a mortgage on a farm, or provide a sufficient 
sum to give his children an ample education in case of 
his early death ; he might quote instances where this 
had been done, and show how small a sum of money 
was spent in keeping the policy in force. In soliciting 
a merchant, he might show that the rich merchants as 
a class do insure to very large amounts ; he might 
quote such names as A. T. Stewart, H. B. Claflin, Cy- 
rus W. Field, and many others who had insurance to 
the amount of SlOO,000 and over on their lives. To a 
lawyer he might show that his learning, experience and 
reputation were his "stock in trade," and by his sud- 
den death so much money-producing ability would be 
destroyed. 

Prepared to meet Objections. 

To meet objections successfully the agent should be 
well posted as to individual facts, and should also have 
a good knowledge of the science. A variety of facts 



FOR LIFE AGENTS. 95 

illustrating the practical working of life insurance and 
the benefits it confers upon individuals, is often essen- 
tial to meet objections and cavils. It is highly import- 
ant that the agent should have a large number of in- 
stances stored in his mind, where the provident invest- 
ment of a few dollars in a life policy was the means of 
saving a family from want ; and also be familiar with 
the leading statistics of life insurance. He should 
know very nearly how many companies there are in 
the United States, how many risks are in force, and 
their aggregate amount, how much is annually paid for 
premiums, losses and surplus returned. And when any 
one is disposed to sneer at life insurance, he can pro- 
duce an array of facts and figures which will prove that 
it is one of the most important financial interests in the 
country. If an agent is told that life insurance is a 
humbug, let him ask the objector if it is probable that 
800,000 persons would annually pay nearly $90,000,000 
for a humbug ? If he is told that it is a one-sided game, 
the agent can reply that in the year 1873 the life com- 
panies of this country paid the policy-holders and their 
heirs upwards of $50,000,000 in losses, endowments and 
dividends. There are however some of the more com- 
mon objections, which cannot be disposed of in this 
summary manner. 

Religious Scruples. 

Some people are so superstitious or so ignorant that 
ihey have some religious scruples against insuring their 
lives. They think that there is something sacred in hu- 
man hfe which should not be made the subject of a po- 
licy of insurance. It is regarded as almost as bad as 
man-stealing or dissecting a human corpse. All this 
proceeds from a wrong impression of what life insur- 
ance is. It is unfortunate that we have no word to ex- 
press the true idea, which is : Insurance of income pro^ 
ducing power. A man is valuable in a financial view 
according to what he can earn, and it is this quahty 
only which we insure. With this view we strip it of all 
its superstitious fancies, and make it a plain business 
transaction. It is not many years since some people 
had similar superstitious ideas about putting lightning- 
rods over their houses, barns and churches. If Provi- 
dence designed that their buildings should be struck by 
lightning, it was considered wrong to attempt to turn 
it aside, and so now they think that if they are predes- 
tinated to leave their families in want and poverty they 
have no right to insure their lives to prevent it. 



96. mSTRUCTION BOOK 



Is it Safe ? 

It seems hardly necessary to go into an extended an- 
swer to the question, What is a safe business ? There 
are thousands of clerks and salesmen in our large cities 
who are struggling to commence a mercantile life on 
their own responsibility, when the fact is that on ar 
average ninety-five out of every hundred fail. There 
are thousands of men speculating in stocks in our large 
cities, and every few years a "Black Friday" comes, 
or a corner in some favorite stock, or they "go short 
on Harlem." And their fortunes melt away in an hour. 
The great fish have eaten up the little ones. Savings 
banks ought to be safe, but during recent past years a 
large number have failed, and in 1871 those which 
failed in New York city caused a loss of over $500,000 
to the depositors, and the panic was so great that over 
$20,000,000 were drawn out of other savings banks and 
invested elsewhere. But during the past ten years 
there has been upward of $100,000,000 paid for losses 
by our hfe insurance companies, and how much has 
been the actual cash loss to the policy-holders of 
those which have failed? Less than $200,000, or one 
fifth of one per cent, on the losses paid. Can the ob- 
jector mention any other kind of business as safe fca 
this? 

Rich Enough Already. 

Is he absolutely sure that his family or those depend- 
ent upon him will always be so ? Has he made a pro- 
vision for them so ample and secure that a policy in a 
life company will add nothing to it ? Up the marble 
steps of one of our life insurance offices an aged widow 
is sometimes seen ascending, as she enters to draw the 
periodical payment of an annuity which her husband 
was persuaded to purchase for her when he was a pro- 
minent and successful speculator in Wall street. He 
was " rich enough already. " He did not want anything 
to do with life insurance, and when he purchased this 
annuity, he half believed he was doing a foolish act 
which would be of no use to her, but now it is her only 
support. Most of our wealthy men do not beheve that 
they are "rich enough" to do without life insurance. 
They are the most liberal patrons of our companies : 
they regard it as a safe investment, and a necessary 
protection. 



FOR LIFE AGENTS. 97 



In Debt 



It is a sad thing to live in debt, but that is not the 
worst that can happen to a man. While life remains 
there is some prospect of getting free from one's em- 
barrassments, but death allows no remedy for the mis- 
fortunes of life. To die badly in debt, when all the 
property one may have accumulated will have to be 
sacrificed to pay the just claims of creditors, must be a 
sad prospect to contemplate. To such a man, life is a 
failure. But life insurance provides a remedy for this ; 
it allows a man to hedge or to protect himself from this 
disaster if he is wise in time, and to throw his burdens 
upon a company which is able and willing to bear them. 
When a man is badly in debt, and has no means of ex- 
tricating himself immediately, life insurance is a duty, 
and he should provide means to get clear of his obli- 
gations as soon as possible. If he does not, he is de- 
frauding his creditors. It is his duty to be honest with 
them, and posthumous honesty (if such an expression 
is admissible) is as important as any other. All this is 
provided for by a life insurance polic5\ Life enables 
him to throw it off by his own exertions, and if death 
comes before he is entirely successful, the company ac- 
pomplishes the remainder. 

The Money is needed for Business Purposes. 

Some people think they can use their money at bet- 
ter advantage in business. Perhaps they can ; but as 
this is a matter of uncertainty, we will see what per 
cent, can be made in life insurance. A man aged 25 
spends twenty dollars a year on a life policy of $1,000. 
If he dies during the first year the profit is 5,000 per 
cent. If he pays ten premiums and gets no dividends 
or increased insurance, and then dies, his profits are 
360 per cent., reckoning compound interest on his pre- 
miums at six per cent. Suppose he pays for twenty 
years, and the amount insured is increased by rever- 
sionary insurance to $1,400, his premiums at six per 
cent, and compound interest will amount to nearly 
$T80, and he will make nearly 18 per cent, on his pay- 
ments in case of death at this time. It is a matter of 
simple prudence, then, to spend some money in life 
insurance, even if it is taken from the regular business. 
Taking into consideration the protection which is of- 
fered by this policy, and the percentage of profit it 
would bring to his heirs in case of death, there is no 



98 mSTR UCTION BOOK 

way of investing money which would yield greater re« 
.turns. 

The Money spent in paying other Death Claims 
is a Loss. 

So is the money spent in paying policemen to pro- 
tect our property, in paying for a city, State, and na- 
tional government. For the money spent in this man- 
ner we get no returns, as when invested in stocks and 
bonds, but the money is not lost ; protection is pur- 
chased ; the sense of security to life and person and 
pi'operty is what we get in return. So in life insurance ; 
a policy is a protection to some one against poverty 
and want, and so far it is a positive benefit to him who 
pays the annual premiums. But suppose the ' ' death 
claim " should happen to arise from the objectors' own 
policy ; how then ? 

No one dependent upon him. 

This is not a natural condition for a man to be in. 
If this' excuse is made in sincerity, it is a confession 
that the man is leading a selfish life, a sort of waif upon 
society. Such reasons are seldom made in earnest ; 
they are designed simply as excuses for not giving the 
subject attention. If he has parents who are living, 
and whose circumstances compel them to labor for a 
livelihood, then it would be an act of filial gratitude to 
have his life insured for their benefit. If their old age 
cannot be made free from care and labor by his life, it 
ought to be made free from want in case of his death. 
Bat this is not an honorable position to be in, nor one 
to be envied. Every honest and honorable young man 
looks forward to the time when he shall be able to have 
others dependent upon him for support, and life insur- 
ance will enable him to leave them free irom want. 

Some Other Time "will do as "well. 

No, it will not? Every succeeding year increases 
the rate of premium, and renders it more probable that 
the man may be rejected. The rates for a life policy 
in most of the mutual companies is about double at 
forty-six what they are at twenty-five, and at fifty -five 
they are three times as much. If a man ever intends 
to insure his own life, he should do it as soon as pos- 
sible. "Some other time " the man may be killed by 
an accident, disease or other mishap. No reliance can 



FOR LIFE AGENTS. 9» 

be placed upou the future ; the force of the arguments 
now presented may pass away or be enth-ely forgotten. 
We have read of a place that is paved with good in- 
tentions, and we doubt not but good intentions in life 
insurance cover a large surface. 

The Policy may Lapse. 

A man should never take more insurance than he 
can pay for. If he cannot be tolerably sure of paying 
the premiums on $10,000, let him try one of $5,000 or 
less, and when his circumstances admit of it, the sum 
can be increased. This result can be avoided by tak- 
ing that kind which will admit of a paid-up policy after 
a few years. If a policy-holder" \sill adopt these three 
rules, there is little danger of his policy lapsing : He 
should never take a larger policy than there is a reasonable 
prospect of his being able to carry ; he should choose that 
kind whose payments are most suited to his condition, 
and then let him resolve to keep the policy alive at all 
hazards. 

Reasons for Insuring. 

An agent should always act on the offensive if possi- 
ble. It is not so much his duty to defend life insur- 
ance as to recommend it. Indeed, we do not know 
but any attack upon life insurance, as a method of 
providing against future calamity, should be met with 
silent contempt. It is so well known and so universal, 
that he who looks upon it as a humbug, and proclaims 
his opinion as such, confesses himself to be ignor- 
ant of one of the great financial organizations of the 
day. But when men bring up objections against life 
insurance, the best way is to assume the offensive imme- 
diately, and give the objector all he can do to answer 
the arguments in its favor. Since the agent is con- 
vinced that he has the strongest side of the case, he 
should come outside of the walls and fight, and not be 
satisfied with merely defending himself behind breast- 
works. 

For this reason we present a few of the most common 
arguments which may be used in favor of life insur- 
ance, leaving it for the agent to iUustrate them by indi- 
vidual facts as he may see proper : 

Life is uncertain. Every one knows that this is true 
as respects other persons than himself. It is easy for 
an agent to show him what per cent, is the tabular risk 
of his dying at a given age, and how this risk is in- 



100 INSTRUCTION BOOK 

creasing every year. If some one apparently in good 
health and well known has suddenly died, such an il- 
lustration may make this argument very effective. 

Unwise to defer. Three old saws, "Be wise in time," 
"Delay not," "Procrastination is the thief of time," 
etc., are almost as ancient as the human language, and 
their universality and antiquity perhaps destroys their 
value; but tell a man that on an average every year of 
delay adds to the cost of a policy, that the annual pre- 
mium must be increased with the additional probability 
of death, and the agent has touched his pocket. Ac- 
cording to all the calculations in use, the older a per- 
son becomes after the period of youth the greater the 
danger of death, and also the annual expense to pay 
the death claims of others. The sooner one insures, 
then, as a general rule, the less it will cost him. 

Lfe insurance adds to the length of one's life. The 
Irishman who remained perfectly unconcerned when 
the ship was sinking, because he had just been insured, 
was right in theory, but wrong in the manner of appli- 
cation. Whatever makes a person free from care in re- 
gard to want and the support of his famil3% has a tend- 
ency to prolong life. Persons who are supported by 
annuities live much longer than the average of man- 
kind; the same is true of pensioners on the govern- 
ment, and also of those in private life who have no 
care for the future and whose habits of living are cor- 
rect. Life insurance has the same effect; it gives the 
assured a calm satisfaction that in case of his sudden 
death he has made provision for those who are depend- 
ent upon him, and just so far as life insurance produces 
this result, so far it tends to prolong bis life. 

Every man can leave his family free from want. Be- 
fore fire insurance became universal, when a man's 
house burned down his neighbors used to contribute to 
enable him to rebuild and make up his loss; but now 
he goes to his company, and it writes a check for the 
amount of insurance. How does this differ from the 
old method? Simply thu^: All who have policies in 
the same fire company made their contributions when 
they paid their premiums, and they entrust the mo- 
ney to the company till the fire takes place, and then the 
company pays the amount insured. In a life insurance 
company all the policy-holders mutually protect each 
other by paying a stipulated sum in advance for every 
thousand dollars of insurance they receive, and in case 
of the death of one of their number, their contribu- 
tious having been made, the company pays the amount 



FOR LIFE AGENTS. 101 

insured over to the heirs of the deceased. Instead ol 
having to contribute to the support of his family aftei 
he is dead, they make their contributions while he is 
hving. There is no charity or benevolence in this ; it is 
simply a business matter for avoiding charity and be- 
nevolence. This is a privilege which every man can en- 
joy who begins when he is in good health. If life in- 
surance ever becomes universal in this country, nearly 
all want and destitution will be confined to those who 
come from other lands where it is not so much prac- 
ticed. 

A policy is an immediate provision for one's family in 
case of death. A policy is a contract by which the com- 
pany agrees to pay the sum insured on certain condi- 
tions — usually upon the death of the insured, or, in case 
of an endowment, the attaining of a certain age. When 
this takes place, the amount of insurance is realized. It 
is creating a contingent fortune out of a small annual 
premium. It is making a will and leaving the family 
a certain amount of money which the policy-holder has 
not got and never had. 

This argument' is so ably presented by Hon. Elizur 
Wright that we quote, it in full. 

"In tlie old order of things a man's estate or source of income, 
if of any considerable magnitude, was usually of such a nature 
that not much of it could be buried with him. It remained be- 
hind to nourish his heirs. But since the more general diffusion 
of knov^ledge and machinery has multiplied the men whose 
minds are solely their estates, and very productive ones too, the 
breiad of the fatherless is too often buried with the father. And 
it is not the laborer's crust that is taken so suddenly from the 
child's mouth, but the provender of princes. The handle of a 
awitch pointing a few degrees in a wrong direction may not only 
extinguish a constellation of the lights of society, but precipitate 
a scoie of families from aflauence to destitution. Though mate- 
rial wealth has increased at equal pace with general knowledge, 
yet it is now the rule rather than the exception that young men 
set out in life with but very little. Their patrimony they have 
invested in mental culture. If they are to have families, they 
must either wait single till by their industry they have accumu- 
lated funds, or run the risk of leaving destitute the helpless beings 
. whose support they have assumed. Here life insurance comes to 
their aid by guaranteeing at once, in case of death, a sufficient 
fund to sustain the widow and orphans. This it does in consid- 
eration of a moderate annual payment to be continued for a term 
of years, or for life. To the young man whose income is some- 
what more than adequate to the unavoidable current expenses of 
a family, the life insurance companies say, ' If Nature bids yo"u 
marry, and only Poverty forbids, obey Nature and we ^^^ll taka 
care of Poverty. Do it now in your i^rime, and let the next gen- 
eration inherit from you all the strength and genius which the 
beat conditions will allow.' The savings bank says, ' No, my 
friend, the voice of Nature is premature and imprudent ; you 



102 INSTB UCTION BOOK 



had better wait a few years— half a dozen at least.' So say all the 
other means and institutions for the accumulation of capital, and 
consequently leave the general happiness, not to speak of the 
good order and good morals of society, in the lurch. Life insur- 
ance possesses exclusively the power of creating at once an ade- 
quate provision against the destitution of dependents in case of 
death." 

Life insurance enables one to provide for himself in old 
age. Next to leaving others dependent and in want, is to 
find one's self in that condition when the fires of youth 
and the strength of manhood have passed away. 

" Is theie any sadder sight to contemplate than that of a poor 
old man whose days of usefulness are over, one whose opportu- 
nities for making a fortune are past, and who, by want of foresight 
or by misfortunes, finds himself near the end of his journey and 
his life a perfect failure ? His example is only a beacon to warn 
others of their danger. He is neither welcomed nor honored, 
nor hardly ever respected in good society, and when he has 
reached the end of his life he will depart without leaving any- 
thing for those who have in vain looked to him for a comfortable 
support. In his younger days he might have taken out an en- 
dowment policy, and the influence of such an act of forethought 
would have made him more careful as a business man, and the 
policy, when payable, would have placed him above the fear of 
want. Is there anything worse than this ? 

" Yes, there is one other picture more sad, more pitiable. It is 
that of a poor woman who in the helplessness of old age is left 
alone in the world. There are many such who have been reared 
in wealth and affluence, and during the greater part of their days 
have basked in the sunshine of prosperity. But death has en- 
tered her household and taken away her husband, the protector 
of her life, and her happy dream of wealth has been changed to 
the stern realities of poverty. Her husband, once reputed rich, 
died poor. His plans for amassing a fortune were not realized 
when the stern, unwelcome messenger came, and she found her- 
self face to face with all the hardships and bitterness of poverty. 
No life insurance poUcy was at hand to gladden her sad heart, 
like an angel of joy in her afSiction ; her husband had not the 
time to attend to it, or the money to spare from his business, oi* 
the expenses of his establishment were too great, and life insur- 
ance was dismissed as unworthy of a thought." — How to Die 
Rich. 

Money value of a policy. There is a certain class of 
men who may be induced to insure on the endowment 
plan, because there is a money value in a policy of 
this kind which is certain of being realized provided 
they survive the term of insurance. In this policy a 
large part of the premium is taken for the reserve, 
and by' yearly accumulation it becomes equal to the 
sum assured. While furnishing insurance it may also 
be used as a security, or for the payment of debts. As 
this hpweyer is not often resorted to it should not be 



FOR LIFE AGENTS, 103 

presented except to those whose business may require 
them to make some such use of it. 

A safe investment. There are over $50,000,000 invested 
in the capital of the fire insurance companies operating 
in the city of New York, and their gross assets amount to 
over $100,000,000. Every few years a great fire takes 
place which annihilates a few millions of stock, and the 
stockholders make up the deficiency. More than $20,- 
000,000 capital and $10,000,000 including assets was de- 
stroyed by the Chicago fire, but that did not deter 
parties from coming forward and putting up an equal 
amount to- make it good. They knew perfectly well 
that it was not an absolutely safe investment, but they 
took the risk and the profit into consideration. But 
all the unavoidable cash losses to policy-holders in life 
companies by failures in the United States has been 
less than one per cent, of the total fire insurance loss 
at Chicago, Taking these facts for a guide, which are 
mere examples and do not exhanst the subject, the ra- 
tio of safety between money paid to a life company and 
money invested in fire iusurance stock is about two 
hundrgd to one. 

Examples of our best financiers. Those who take 
the largest lines of insurance are our best financiers. 
They are men who understand the value of money and 
how to use it to the best advantage ; they comprise out 
wealthiest merchants, bankers, and brokers, and not a 
few life insurance officers and agents. If there were a 
probability that life insurance would prove a bad in- 
vestment, the latter class would be the first to find it 
out, but the fact is, there are scores of them in New 
York city alone who have their lives insured in sums 
from $25,000 to 8100,000. It is not every doctor who 
will take his own medicine like this. 

One Plan of Insurance. 

Having learned what kind of insurance would prob* 
ably be most acceptable to the party solicited, the agent 
should present only one kind for his consideration, un- 
less he manifests a preference for some other. If an 
agent talks life, ten payment, and then endowment in- 
surance, he will be apt to get the applicant so confused 
that he will not choose either. If the agent attempts 
to figure out with his pencil how half dozen kinds will 
operate, how much he will have to pay for a certain 
term of years, the man will want to think the matter 
over a few weeks, and perhaps it will end in some more 
SKillful agent getting him into another company, Wheo 



104 INSTRUCTION BOOK 

the agent has once made up his mind what plan is the 
most appropriate, and most likely to he kept in force 
till all the premiums are paid, he should hold his atten- 
tion to that only ; but if the applicant desires some 
other kind, the agent should be careful to explain the 
difference between them, so that he may choose under- 
standingly. As a general rule, men are so ignorant of 
life insurance that they take such kind of policies as 
are recommended to them by the agents. We hope the 
time will come when the different qualities will be well 
understood by the public, but until then, the honesty 
and faithfulness of the agent will be tested, for he is 
too apt to recommend those plans which bring the 
largest commissions, irrespective of the wants of the 
policy-holder. 

Making out the Application. 

At the proper time, when the applicant is sufficiently 
convinced, he should commence filling out the applica- 
tion, the agent affording him every assistance, but ne- 
ver, where it can possibly be avoided, writing a word oi 
it himself. The agent should explain the different 
questions of the application and the reason why so 
many are asked. If a man was going to buy a farm 
and pay $10,000 for it, and had no means of seeing it 
himself, but had to depend upon the opinions of ano- 
ther and the testimony of the owner, would he not be 
apt to ask a great many questions and insist upon theii 
being answered definitely ? In this case the company 
agrees to pay $10,000, more or less, for carrying this 
risk through life or any other period, and it is the com- 
pany's duty in justice to the remaining policy-holders 
to have the fullest information. This application is the 
only guide which the medical examiner at the home of- 
fice has of judging of the health of the party insured, 
and it is of the utmost importance that every part of it 
should be done as directed. All the blanks should be 
filled out with a clear and legible handwriting, and es- 
pecial pains should be taken to write the proper names 
in full and correctly. 

Medical Examinations. 

The medical examination should follow as soon as 
possible after the application is signed. The apphcant 
is usually a little impatient to know whether he is ac- 
cepted or not. It creates a favorable impression tc 
have the affair completed with no unnecessary delay. 



FOR LIFE AGEXTS. 105 

The agent should remember that the commission is ne- 
ver secured till the policy is accepted and the premium 
paid, and that there are many chances of failure when 
the agent thinks it is perfectly safe. In the medical ex- 
amination the agent has no right to intimate or suggest 
what the replies to any of the examiner's questions 
should be. He should not be present when the exam- 
ination is made. 



Delivering the Policy. 

The policy should be delivered as soon as it is re- 
ceived by the agent. Delays are dangerous, for a poli- 
cy-holder may change his mind and refuse to take it, in 
which case the medical examiner's fee, the expense of 
making the policy, and the agent's trouble, are entirely 
lost. The agent should receive the premium when he 
delivers the poHcy. If the premium is not ready he 
should retain the policy till it is, or make such arrange- 
ments for it as the company permits, so that it may be 
perfectly safe. Although policies say that the contract 
is not binding unless the premium is paid in advance, 
yet the courts have made so many decisions adverse to 
companies on this and other points of a similar nature, 
that it is very unsafe to run the risk, for in case the po- 
licy-holder should die shortly after the policy is deliv- 
ered, and before the premium is paid, the company 
might be held liable for the loss on the ground that the 
agent had waived the payment of the premium for the 
present. (See Chapter XV.) 



Semi-annual and Quarterly Premiums. 

Semi-annual and quarterly premiums should be avoid- 
ed if possible. The agent should not speak of the 
semi-annual or quarterly rates unless the applicant asks 
for them. They make from two to four times as much 
oflfice work as annual rates, and the poHcies are much 
more liable to lapse. The policy-holder gets tired of 
paying premiums every few months, and finally con- 
cludes that as the quarterly or half-yearlj^ premium is a 
small matter, it may as well be given up altogether. The 
agent too cannot come around every three or six months 
to collect a quarterly or half-yearly premium ; the com- 
mission is too small and the policy-holder is neglected. 
This is the history of too many policies which encum- 
ber the registers of the companies, which otherwise 
would have been kept in force. 



106 MS TR UCTION BOOK 



"Not Taken" Policies. 



We come now to treat of a subject which is a great 
misfortuDe to many companies and a perfect disgrace 
to their agencies. The vast number of " not taken " 
poHcies which appear in our State reports shows that 
there is a fearful lack of correct business talent among 
agents. It looks bad for a company and still worse for 
an agency to have a large list. It shows that the agents 
have been trying to do a sensational business— that they 
are seeking to make a good show at the expense of the 
company. 

In the great hurry to get applications, there is a ne- 
glect of securing the policy-holder after the policy is 
made. It is as much the duty of the agent to deliver 
the policy and secure the premium as it is to get the ap- 
plication, yet this part is often grossly neglected ; the 
man is allowed to get tired of his bargain and finally 
concludes that he will not insure at all. In many com- 
panies from twenty to forty per cent, of the business 
is canceled as " not taken." This is unjust to the re- 
maining policy-holders. Every policy with the medi- 
cal examination and office labor and expense costs ten 
dollars or more, and if five thousand policies are writ- 
ten in a year, and one or two thousand are '• not 
taken," here are ten or twenty thousand dollars of ex- 
penses put upon the remaining three or four thousand 
policy-holders, which must come out of their returh 
surplus. Companies are greatly to blame for this state 
of things ; they ought to require a reason of such an 
agent why his policies are " not taken," and find out 
whose fault it is. It would also be an improvement to 
make every policy-holder pay for his own medical exa- 
mination, which is done in some companies ; then one 
great source of expense would be removed and the ap- 
plicant would feel himself somewhat under obligation 
to take the policy. Whenever this plan has been tried, 
it has had a signal success in diminishing the " not 
taken " policies. 

Small Policies. 

An agent should never despise small policies. If he 
commences with a stranger by talking to him of a $10,- 
000 policy, premium $500 per annum, it is doubtful if 
he can persuade him to insure ; but if he can succeed 
in getting him to insure for some amount, if it is not 
more than $500 or $1,000, and then fill out the appli- 
cation, leaving the sum blank, when it is ready to 
be signed, the agent can tell him that this is rather a 



FOR LIFE AGENTS. 107 

small amount for so much trouble, and that it ouglit to 
be about $2,000 or $5,000. Some of our largest com- 
panies have their policies average less than $2,500 
each, and by far the greatest number of policies are 
written for sums of $1,000 or $2,000. 

Habits and Occupation. 

Although the medical examiner is the final arbiter of 
the acceptance or rejection of a risk, yet there are some 
circumstances attending the occupation and habits of 
applicants which an agent should understand in order 
that he may recommend a risk intelligently, or know 
that it IS one that the company will probably refuse. It 
is mortifying to an agent to spend a long time in secur- 
ing a risk, and then to have it rejected at the home of- 
fice, and still more to the applicant who has become 
convinced of the value of life insurance. The company 
is also put to some additional expense for the medical 
examiner's fee, which must be paid by the other policy- 
holders. It is practically impossible for the agent to be 
so well informed that he will wholly avoid making mis- 
takes of this kind, yet there are a few plain and simple 
directions which will enable him to give a good practi- 
cal estimate of the probability that an applicant will be 
accepted or rejected. 

The age of the applicant has an important influence 
on the value of the risk. Children under five years of 
age are not proper subjects for insurance, as the mor- 
tality during this time is over fourteen per cent. One 
seventh of all children die before the age of five years, 
and the danger of dying before puberty is much greater 
than during the years immediately subsequent. The 
best risks are between the twenty-fifth and fortieth 
years, for during this time the influences of hereditary 
maladies are less to be dreaded and the system is best 
fitted to resist disease. 

Agents should never attempt to insure a person ad- 
dicted t '' intemperate habits, and even a reformed 
drunkard should be looked upon with suspicion, for his 
previous course may have sown the seeds of some fatal 
disease. According to the observations of Mr. Neison, 
of England, the rate of mortality among intemperate 
persons is fearfully high, unequaled by the results made 
on Any other class of the population of the country. 
Between the ages 21 and 30, the mortality of this class 
is five times as great as that of the general community, 
and four times as great during the succeeding 20 years. 



108 INSTB UCTION BOOK 

It is not deemed advisable to explain the influence ov 
tendency of certain disease upon the applicant, as this 
is in the province of the medical examiner, but the fol- 
lowing remarks of Dr. Allen upon the influence of dif- 
ferent occupations on the health, are interesting and im- 
portant to agents ;* 

Professional Jfe«.— Teachers exhibit the greatest longevity. 
Next come clergymen, who are subject to few diseases save those 
incident to sedentary bits. Contrary to the vulgar opinion 
they are not more liable than others to pulmonary affections. 
Dyspepsia with its incidents is their principal affection. Lawyers 
rank next. Then professional lecturers, and next physicians. Of 
the latter it may be said as a class they have not the ordinary ex- 
pectation of hf e by from one third to one fifth subtra^^tiou ; nev- 
ertheless, the variety of exposure and habits is such that each 
case requires isolated investigation. 

Artists.— Vainievs, and sculptors rank among the best risks, par- 
ticularly when the former sketch from nature and the latter mere- 
ly model. Portrait painters and sculptors who cut marble them- 
selves are not good risks. Photographers and daguerreotypists 
rank second class. 

Artisans and Mechanics. — Painters using lead and oils are unde- 
sirable risks, yet need not be wholly rejected. Workers in phos- 
phorus and quicksilver stand upon the same level. Stoue-cutters 
and millers, and similar occupations where insoluble or irritant 
particles find constant access to the pulmonary surface are less 
desirable, but improved methods of ventilation now in vogiie 
render them less objectionable than formerly. Glass-blowers ar^ 
poor risks. Compositors in printing-houses siguaUy demand cau 
tion in acceptance. Blacksmiths, furnace men, carpenters, coop 
ers and cabinet makers range among the most healthy opeiatives, 
Shoemakers and harness-makers, mainly from their sedentary ha- 
bits, are second-class risks. The same remark may be made oi 
tailors. Butchers and market-men, aside from the chances of ac- 
cident, (to the former particularly,) are good risks. Machinists, 
plumbers, tinsmiths, taUow-chandlers and barbers, and similai 
occupations, are good risks. Engravers, jewelers and the like, 
are liable to the diseases of sedentary- life, but are otherwise un 
objectionable. Brewers, confectioners, dyers, hatters, baker?, 
and others whose business involves constant exposure to warm 
vapors.often impregnated with medicinal or poisonous substances 
are not as desirable. Chemists, assayers, gilders, tobacconists, 
etc. , are liable to the same objections. Day laborers, unless ex- 
posed to accidents, are equally good risks as mechanics. Agri- 
cultural laborers in salubrious localities are the highest order ol 
desirable applicants. 

The best lives, other things being equal, are those of persons 
engaged in out door and yet protected employments, where the 
occupation is somewhat sedentary, and yet combined with a cer- 
tain amount of muscular exercise, with pure air and variation 
enough to secure a stimulating impression upon the system. In- 
ertia, indolence, and absolute uniformity of meteorological influ- 
ences, are as prejudicial as over-exertion and atmospheric vicissi- 
tudes. 

* Medical Examinations for Life Insurance, by James Allen, 
M.D., LL.D, 



FOB LIFE AGENTS. 109 



CHAPTEE Xn. 

THE POLICY-HOLDEE. 
The Agent's Friend and Assistant. 

Having ouce insured a man and delivered the policy, 
the agent should make all possible use of him to get 
more business. The insured usually feels that he has 
made a good bargain, and is anxious that others should 
have the same benefits. The business of life insurance 
is such that there is no danger of a well-managed com- 
pany having too many poUcy-holders, and those who 
are insured cannot monopolize its advantages to the 
detriment of new members. The agent should show the 
policy-holder that his insurance will be cheaper and 
that the ratio of expenses will be lessened by having the 
number of members increased. The new policy-holder 
can introduce the agent to his friends, and by his exam- 
ple and presence can often influence some of them to 
insure. If the agent is a stranger the policy-holder can 
give him valuable information as to what their circum- 
stances are, about how large policies they would prob- 
ably take, and what their ideas are about life insurance, 
60 that the ground is all mapped out beforehand. The 
agent should always bear in mind that he should take 
advantage of every favorable opportunity to press the 
claims of his company. If the new policy-holder is a 
weli-known, influential man, he can be referred to by 
the agent. The fact that Mr. A. or B. has insured will 
'ifteu determine C. and D, 

Policies should not be allowed to Lapse. 

The greatest number of policies lapse at the end of or 
luring the first year, and the general experience of com- 
panies is that the longer a policy is kept in force, tlie 
oiore likely it will be, till maturity. Hence it is of 
great importance that the policy-holder should pay the 
first three or four premiums regularly, and after that 
their continuance is tolerably sure. The agent should 
be prompt in collecting renewal premiums, the notices 
of payment should be sent some weeks in advance, and 



no INSTRUCTION BOOK 

it may be advisable for him to call upon the policy- 
holder for his premium. This is a good opportunity ol 
asking him to take additional insurance, or inquiring ii 
some of his friends can be persuaded to insure. In 
collecting premiums the agent should be guided strictly 
by the rules of the company, declining to take one too 
long overdue, unless a certificate of good health is 
given. If the insured is dissatisfied with anything con- 
nected with the company, care should be taken to set 
him right. For this purpose the agent should have 
Bome printed statement of the yearly report of the com- 
pany, or some leaflet of a statistical nature, adapted to 
meet his case. Both officers and agents should take 
the greatest pains to keep the policies of the company 
in force. One policy which lasts twelve years is much 
better for the company, and far less expensive, than four 
policies which lasts only three years each. * 

The officers of companies are often greatly to blame 
for the number of lapses on their books ; their constant 
cry is, "Get new business, for that is the prevailing 
criterion of the prosperity of the company." It is not 
the new policies taken, whose first premiums are almost 
wholly eaten up in commissions and expenses, which 
add to the strength and increase the assets of the com- 
pany, so much as the renewals collected for a series of 
years at a small percentage. In another part of this 
book (Chapter XIII. ) we have shown that there is little 
or no benefit derived by the company from the lapsing 
of a policy during the first two or three years, but on 
the contrary', a lapsed policy is a positive damage— it 
gives it a bad reputation; agents look at the State re- 
ports and see the number, twenty, thirty, or perhaps 
fifty to eighty per cent, of the new business falling 
away; they know that so large a ratio of policies would 
not lapse without some good reason; they conclude 
that there is dissatisfaction with the dividends, or the 
officers or agents have made promises which have not 
been realized. 

To remedy this, a systematic effort should be made 
by every company to find out why each policy lapses. 
If the company is to blame, then this evil can be cor- 
rected in the home office ; if the policy-holder is unfor- 
tunate in his financial affairs, then he should have an 
extension of time, if the case will warrant it. Compa- 
nies will find it for their interest to spend more time in 

* Suppose a policy has a premium of $100, aud the commis- 
sione and initial expenses are 40 aud the renewals 5 per cent. 
One policy kept in force twelve years would cost the company 
$95, but four policies of three years each would cost $200. 



FOR LIFE AGENTS. llf 

looking after their old business, and keeping it in force. 
There are some companies which have taken an im- 
mense number of new policies during the past few 
years, but theit- total amount at risk and assets have not 
grown correspondingly. If one haff the commissions. 
spent in procuring new policies had been judiciously 
used in keeping the old ones alive, these companies 
would have had a larger number in force, and be in a 
more prosperous condition. 

Too Much Insurance a Cause of Lapse. 

Agents often induce a man to take more insurance 
than he is able to sustain. He pays the first and per- 
haps the second and third premiums, and then by some 
reverse of fortune he finds that his load is heavier than 
he can bear. He finds that he has over-estimated his 
ability to j^ay the premiums, and now he is in great 
danger of losing all. Had he taken two policies, each 
for one half the amount, he might have obtained a 
paid-up policy or surrender value for one and still keep 
the other in force. In this as in other cases, it ia for 
the interest of the ag^nt to insure the policy-holder so 
thai he will stay insured. 

Settlement of Claims. 

This is a part of the agent's duty, and if properly 
performed it may be the means of bringing him con- 
siderable business. When a policy-holder belonging to 
his company dies, if residing within the jurisdiction of 
his agency, he should lose no time in having the 
proofs of death correctly prepared and forwarded to the 
home office. This should be done at the earliest con- 
venient date, for the widow or friends of the deceased 
seldom know the proper steps to be taken, and the 
claim will not be paid till a certain number of days after 
the proofs of death, prepared in a proper manner, are 
sent to the company. 

The agent should take an early opportuuit}' to com- 
municate with the heirs of the deceased and assure 
them that they have his sympathy in their aflliction, 
and that he will take the entire trouble and responsi- 
bility of collecting and paying over the amount due on 
the poHcy. An offer <if this kind can be made, if 
rightly managed, without appearing officious or wound- 
ing the feelings of any one, and the agent will generally 
find the friends of the deceased very grateful for hip 
proffered kindness. 



112 INSTR UGTION BOOK 

It is needless to state that such a course will make 
the agent favorably known in the community, and that 
the advantages of life insurance should be pressed up. 
on all who are disposed to listen. An opportunity of 
this kind, rightly improved, may be the means of reap- 
ing an annual harvest of premiums each equal to the 
Amount of the claim. 




FOR LIFE AGENTS. 113 



CHAPTER XTII. 
SUKEENDER VALUES AND PAID UP POLICIES. 

One of the most fruitful sources of dissatisfaction 
among policy-holders at the present day is the disap- 
pointment experienced in not obtaining from the com- 
panies what they consider a just and equitable surren- 
der value for their policies. When the insured has 
paid a number of premiums on his policy, and is un- 
willing or unable for any reason to keep it in force, 
he generally expects the company will return to him a 
large part of the amount which he has paid, or convert 
it into paid-up insurance. Very few policy-holders 
stop to consider whether their payments have been all 
cash, or part note or loan; and they think they are just 
as much entitled to a liberal surrender value in the 
latter case as in the former. In nearly every instance 
the advertising pamphlets of the company promise to 
give an " equitable surrender value " for a policy, after 
two or more payments; they represent that all policies 
are nou-forfeitable, and agents in setting forth the 
merits of their companies are apt to make more liberal 
promises than their companies can afford to fulfill. 

Fire insurance companies have short-term rates 
which are used in computing the surrender value of an 
unexpired fire policy, and a property-owner in giving 
up an unexpired policy of insurance on a building, has 
only to present it to the ofiBce and receive the un- 
earned premiums less a surrender charge. So in life 
insurance, if one is carrying an all cash life or endow- 
ment policy, his ideas of equity, independently of what 
the company and its agents say, teach him that there 
is a large part of the premiums which he has paid into 
the company from which he has not received any ben- 
efit, and he thinks the company is taking an unfair ad- 
vantage of his misfortunes if it does not liberally re- 
spond to his request for a surrender value. In some 
instances these views are correct, and it is probable 
that some companies do fail to return to the lapsing 
policy-holder all the unearned premiums they can af- 
ford* to, and yet there is a limit in this matter known 
only to each company, beyond which it cannot go with- 
out damaging the interests of the remaining members, 



114 mSTBUCTION BOOK 

who constitute the great majority, who pay their premi* 
■urns promptly, and whose interests are equally entitled 
to protection. 

In order to enlighten the public and to explain to 
agents and the insured how far a company is justified, 
with a due regard to the remaining members, in pay- 
ing cash surrender values on policies which are dis- 
continued, we shall undertake a short discussion of this 
subject. 

We may remark that our reasoning does not directly 
apply to those few companies which have a clause in 
their policies guaranteeing to their policy-holders a 
fixed surrender value after a certain number of premi- 
ums have been paid. The insured, accepting the policy, 
accepts these conditions, knowing just what he can 
depend upon, so there is no room for misunderstand- 
ing. 

Actual and Tabular Cost of Insurance. 

And just here we wish to make some explanations 
which the reader will probably need in perusing this 
chapter. The term, ' ' cost of insurance, " which is used, 
means simply the tabular or theoretical cost, accord- 
ing to the mortality tables and rate of interest, and not 
the actual cost which the company has to meet while 
carrying a risk. To illustrate the difference between 
these, a man gets his house insured for one year by 
paying a premium of $100. This is as low as the coin- 
jpany can afford and pay all the working expenses. But 
how is this $100 spent by the company ? Sixty dollars 
is used in paying losses on other buildings; this is the 
tabular or theoretical " cost of insurance ;" $30 goes to 
pay agents' commission and office expenses, and $10 
is the dividend or profit on stock. In order to get his 
house insured the man must pay $40 more than the 
tabular cost of insurance. 

In life insurance there is the same distinction be- 
tween the net or tabular cost and the actual cost of in- 
surance. The net cost is given in the tables; it can be 
computed to the nearest mill, but the actual cost can- 
not be determined beforehand; it includes the average 
expense which the company has to bear in keeping the 
company alive as a working organization. A life as 
well as a fire insurance company must incur expenses, 
such as salaries, office rent, commissions, printing, etc., 
and these must come from the policy-holders. Thii* 
should not be regarded as a hardship unless the expen- 
ses are extravagant; it is one of the conditions of enjoy* 
ing the protection which the policy-holder pays for. 



FOR LIFE AGENTS. 115 



Net Values and Surrender Values. 

Nor is the "net value " of a policy the same as the 
♦' surrender value," as will be seen by the illustrations 
of this chapter. The net value is that part of the pre. 
miums which the company must have on hand in order 
to comply with the State laws respecting solvency, but 
the surrender value is what the company can afford to 
pay in order to be released from the bargain it has made 
with the policy-holder, and is usually somewhat less 
than the tabular or net value. 

Smith, a stock broker, contracts with Brown, a banker, 
to receive of the latter one hundred shares of a certain 
railroad stock every January- Isc for ten years at 65 
cents on a dollar. But each successive year the stock 
falls two per cent. , and at the end of four years Smith 
wants to be released; he has made a bad bargain and 
can get the stock cheaper elsewhere. Brown says, "No, 
the stock is now at 57, and it will probably go down to 
45. If it had taken an upward course to 73, I should 
have lost as much as you have. I cannot let you off 
and return to you the monej' you have paid, unless I 
deduct from it the present value of all the future pro- 
fits I am likely to make, that is, make a surrender 
charge large enough to save me from loss." 

Now substitute the word "policy-holder" for Smith, 
and " life company " for Brown, and "life insurance" 
for railroad stock, and see how this illustration will 
read. Policy-holder agrees to pay a certain price to 
the company for a definite amount of insurance for life 
or' a series of years. The man is a "good risk," and 
the company has the prospect of making the best of 
the bargain. The company sees that it is going to profit 
by this policy and that there are others which will in 
all probability make them considerable loss, and there- 
fore the company cannot in justice to the other mem- 
bers let him off without making him pay the present 
value of the loss the rest would probably incur by his 
going out of the company. If the risk had been a bad 
one and a loss had occurred, the heirs of the insured 
would have gained nearly the whole amount of the pol- 
icy, and it is unfair that the advantage should be all on 
one side. It is evident then that net value and surren- 
der value are two very different things. 

WTiat is a Policy of Life Insurance ? 

A life insurance policy is a contract between the as- 
sured and the company, whereby, in consideration ol 



116 INSTRUCTION BOOK 

certain representations made in the application, and 
which is part of the contract, and in consideration 
also of the premiums paid and promised to be paid 
thereafter as they may become due, the company agrees, 
on certain conditions, to pay the full amount of the 
policy vvhen it becomes a claim. The fundamental con- 
dition is the payment of premiums when they become 
due. Of the two parties which make a contract, the 
party which breaks it is the one which should suffer 
any damage or loss, especially when the other party is 
ready to fulfill its part of the agreement. If the com- 
pany can show that it has been damaged by the neglect 
or refusal of the insured to pay the regular premium as 
he stipulated, there is no reason in law why the injury 
inflicted on the company should not be made good. In 
practice, however, the policy-holder is never called 
upon to pay damages for not keeping his policy in 
force, for, except in case of term policies, the company 
has a reserve or unearned portion of the premiums on 
hand with which it can indemnify itself. How far the 
company should take advantage of the means in its 
possession to recompense itself for any loss it may sus- 
tain by the lapsing of a policy, is a topic which will be 
considered hereafter. 

Payment of Surrender Values now generally 
adopted. 

The idea of paying surrender value is comparatively 
a modern one. It is not many years since the great Dr. 
Farr of England proposed a scheme in which every po- 
licy-holder in a certain company should be at liberty to 
reclaim at any moment a certain portion of the premi- 
ums he had paid on a policy. Previous to this time, as 
in a few companies at the present day, the failure to 
pay the premium on the day specified caused an en- 
tire forfeiture of the polic3\ In the year 1861, Hon. 
Ehzur Wright succeeded in getting his celebrated non- 
forfeiture law through the Massachusetts legislature, 
and although this did not provide for a cash surrender 
value, it compelled the companies of that State to con- 
tinue the policy in force as a paid-up temporary insur- 
ance as long as four fifths of the reserve will sustain it, 
the policy being subject to the diminution of the un- 
paid premiums in case of death before the temporary 
insurance expires. Since the time when this law was 
passed, there has been a general understanding among 
the companies that the policy-holder is entitled to a 
surrender value, provided there is any cash reserve lef* 
after making a sufficient surrender charge. 



FOB LIFE AGENTS. 11? 

No company would dai-e to advertise itself now as 
never paying a surrender value when a policy lapses, 
for the intelligent public know perfectly well that one 
should be given if the company can afford it. In the 
case of " tontine dividend pohcies," this feature is ex- 
pressly waived. 

In deciding what surreudel value should be paid on 
a policy, every company is a law unto itselt, just as 
much as in the regulation of the annual premiums. 
Hardly any two companies have the same rules for de- 
termining the surrender value, and there are but few 
in which there was formerly any fixed standard for 
computing it. Lesgislation in the leading states, how- 
ever, now fixes the terms upon which the poHcy-holder 
in such states can exact a surrender value for his pol- 
icy. The equity of these legal rules is strongly disputed 
by many of the leading actuaries. While they may do 
justice as between the parties in some cases, they bear 
harshly in others. In fact the pvoblem of laying 
down a general rule equally applicable to the various 
individual eases as well as the various classes of con- 
tracts is not only as yet unsolved, but is a problem 
whose correct solution seems exceedingly doubtful. 
Actuaries are far from being agreed on the principles 
which should govern in any attempted solution. 

The argument which is re'.ied upon to justify the 
making of a sun-endor charge of one third or one 
fourth of the reserve is that the payment of a surrender 
value and the lapsing of premiums withdraws the funds 
of the company which would be available in the pay- 
ment of losses, and diminishes its future profits. The 
payment of claims when they occur is the legitimate 
business of a company ; all other things, such as divi- 
dends and surrender values, are merely subsidiary 
matters. Until the discovery and general adoption of 
a better rule for a surrender charge, this one of a per- 
centage on the reserves will be the one generally 
adopted. While accepting this rule in the following 
illustrations, we do not indorse its want of equity or 
its injustice in making the policy-holder pay the more 
for a surrender charge the longer he remains in the 
company. On the principle that the company should 
charge enough to pay the expense of obtaining another 
equally good risk, it would seem that the longer the 
policy-holder paid his premiums and the more the 
danger of death increased, the easier the company 
should bo in letting him off ; but that view, we are sor- 
ry to say, is not generally entertained. No just and 
feasible method" of computing surrender values has 



118 INSTRUCTION BOOK 

come into general use, and there is hardly anything in 
the management of companies about which there is a 
greater want of harmony than this. 

It is easy to see, from the different views held, why the 
officers of every company would prefer to either adopt 
their own rules for determining the surrender value of 
policies or decide upon the merits of each case, and yet 
in justice to them it is proper to add here that the sur- 
render value is often moditied very much by the condi- 
tion of the insured ; if he is in poor health, (the kind 
which are not apt to allow their policies to lapse,) then 
the company can afford to give a larger surrender value, 
in order to avoid paying the full amount of the policy 
in the probable event of death, than if his physical 
condition were perfectly sound. When a man of ro- 
bust health is insured for life or a term of years in a 
company, he is expected to contribute his share to pay 
the expenses and the losses which are continually oc- 
curring, and in this manner he pays for the protection 
which he enjoys. If he fails to pay his premiums, the 
company does not obtain what it would have gained 
had he remained faithful to his contract, and besides, it 
incurs an increased ratio of mortality. 



Why Companies cannot pay the whole of the 
Reserve as a Surrender Value. 

Suppose a company consisted of two thousand mem- 
bers, and on a certain day, after the policies had been 
in force a few years, one thousand of them, the health- 
iest and soundest, should demand and receive the full 
amount of reserves and dividends declared thereon as 
surrender values, it is plain that such a course would 
greatly increase the future average mortality of the 
company. When these persons insured they openly or 
tacitly agreed to bide by the company till their poli- 
cies became claims ; their retirement has injuriously af- 
fected the interests of the persistent members, and in 
order to do justice to all parties, it will be necessary for 
the company to retain so much of the reserve as will 
indemnify it for the increased rate of mortality occa- 
sioned by their leaving the company. If the ratio of 
mortality to the assets is increased by paying the fall 
amount of the reserve as a surrender value, it is certain 
that the result will be felt in the decreased dividends 
or return surplus to the remaining policy-holders. Noth- 
ing is plainer in life insurance than if th-e insured want 
extensive privileges, and permission to go and come 
when they please, they must pay for these advantages. 



: 



FOR LIFE AGENTS. lU 

The so-called " liberal features," and a generous dispo- 
sition on the part of a company to favor those who with- 
draw, means nothing else than taking Peter's money to 
pay for accommodating Paul. It has been stated on 
good authority that some English companies which 
were too liberal in paying surrender value, some years 
ago, were afterwards con:ipelled to refrain from distrib- 
uting surplus for several years, although their invest- 
ments yielded a larger rate of interest than was as- 
sumed in the computation of premiums. 

Suppose we have two policy-holders insured for 
SI, 000 each on the whole life plan, and each at thirty- 
four years of age, and thai the vitality and health of one 
of them is one fourth greater than the average, that is, 
while the average expectation of life at this age is thirty- 
two years, the healthiest one has a fair prospect of liv- 
ing forty years ; then he would be expected to pay 
eight more premiums on his policy, and the payment 
of his claim would be deferred for eight years. At the 
end of two years both pohcies lapse. The present 
value of these eight future premiums expected from the 
latter policy-holder at four per cent, discount, and at 
the date of the lapsing of his policy, would be $38.37. 
But if the payment of the claim of $1,000 is postponed 
eight years, the present value of the annual interest of 
S70 for eight years, computed at seven per cent. , would 
be $49.76, making a loss to the company on this policy 
of $86.33. In the other case, where the insured was of 
only average health and vitality, we have supposed that 
the company would not have lost or made anything. If 
the excess of vitality in the healthier person was only 
four years, the loss to the company by lapse would be 
$47.89. Now the company having insured these men 
of more than average vitalitj'', is entitled to all that can 
be gained, else how could it pay the early losses ? Is it 
not clear then that a lapsing policy-holder, if in good 
health, would throw an additional bui-den upon the 
rest if he should be permitted to withdraw the whole 
of his reserve as a surrender value ? 

Practical Illiistrations. 

In order to illustrate this subject more intelligently, 
and to show how far a company is justified in paying 
a surrender value, let us examine the nature of a pre- 
mium and its relation to the insured. 

A man aged forty insures on the ordinary life plan 
for $1,000; the office premium is $31.30, the net annu- 
al premium, according to the combined experience ta* 



120 INSTRUCTION HUUK 

ble of mortality, and four per cent, interest, is $23. G8. 
For the first three years the reserve interest and cost 
of insurance will be as follows : 

FiKST Year— Net premium, $23.08 

Interest four per cent. .... .94 

$24.62 
Cost of insurance, 10.21 

Reserve, . . '. $14.41 

Second Year — Net premium, 23.68 

$38.09 
Interest four per cent 1.52 

$39.61 
Cost of insurance 10.30 

Reserve $29.31 

Third Year— Net premium, 23.68 

$52.99 
Interest, 2.12 

$55.11 
Cost of insurance, 10.41 

Reserve, $44.70 

Here are $44. 70 of unearned premiums in the hands 
of the company. There is also the loading, 31.30 — 
23,68 = 7.62, and this for three years is $22.86. This 
item is left out of cousidemtion, as it is used for defray- 
ing expenses and returned as surplus. 

We have already shown that if the insured has more 
than average vitality the whole of the reserve cannot be 
paid as a surrender value without affecting the interests 
of the remaining policy-holders, and that the damage 
done to the company by the lapsing of a policy amounts 
to about eleven or twelve dollars for every year which 
he would have lived longer than the average of policy- 
holders. Suppose that 75 per cent, of the reserve is 
the rule adopted hy the company, ic will amount in 
this case to $33.53, leaving $11.17 to recompense the 
company for what it has lost. 

There is another source of loss which we have not 
alluded to — what the company would have gained from 
the insured toward paying the expenses of the com- 
pany other than the commissions. Eieckoning one per 
cent, on the gross premiums as the amount he would 
have contributed toward meeting the general expen- 
ses of the company, we have another item of $4.81. 
Putting both of these items together, we see very 
clearly that a company cannot pay the entire reserve as 
a surrender value without infringing upon the interests 
of the remaining members. 



FOB LIFE AGENTS. 121 

WTiy Ccmpanies cannot pay a Surrender Value 
at the End of the First Year. 

Many persons are disposed to criticise the conduct 
of life insurance companies because they do not pay 
surrender values at the end of the first year of a policy. 
It is easy to illustrate v/hy this is practically impossi- 
ble, except in case of short-term endowments and ten- 
premium life policies. 

Ordinary life policy issued at iO.for $1,000, premium $31.30. 

Dr. Cr. 

Gross premium, $31.3 J 

Commissions 25 per cent. . . . $7.82 

Medical examination and office expenses, 10.00 $17.82 

$13.48 
Interest 6 per cent .81 

$14.29 
Cost of insurance 10.21 

$4.08 

Surrender charge of 25 per cent, of reserve, 3.60 

Balance in the hands of the company 148 

The surrender charge of 25 per cent, on the reserve 
is as low as the most liberal companies adopt, many com- 
panies charging 50 per cent., and the item for medical 
examination and ofl&ce expenses is as low as the expe- 
rience of the most prosperous and economical compan- 
ies will justify. It is clear from this illustration that 
there is no mone^vmade by the company on a whole 
life policy which lapses at the end of the first year. 

Dr. Cr. 

Second Yeak— Gross premium, . . . $31.30 

Commissions five per cent., . . 1.56 $29.74 

Balance previous year, .... 4.08 



Cash at beginning of the year, $33.82 

Interest at six per cent 2.03 



$35.85 
Cost of insurance 10.30 



Cash on hand $25.55 

Surrender charge 25 per cent, of reserve 7.32 



Surrender value $18.23 

Which is about 62 per cent of the reserve. 

Dr. Cr. 

Ihtrd Year— Gross premium. . . . $31.30 

Commissions five per cent. . . 1.56 $29.74 

Balance previous year, .... 25.55 



$55^ 



122 INSTR UCTION BOOK 

Amount— (continued from last page) $55.29 

Interest six per cent 3.31 

$58.6U 
Cost of Insurance, 10.4:1 

Cash on hand, $48.19 

Surrender charge, ..... 11.17 

Surrender value, 37.02 

Suppose 4U per cent, credit to be given by the com- 
pany on the premium the statement will be as follows ; 

Dr. Cr. 

FlKST Yeak— Gross premium, . . . $31.30 

Credit 40 per cent $12.52 

Commission, 7.82 

Medical ex. and oflBce expenses, $10.00 

Interest on note, six per cent. . .75 

$30.34 $32.05 

Difference, $1.71 

Intei'est, .10 

Cr.end of the year $1.81 

Cost of Insurance, 10.21 

Balance against the company, . 8.40 

Surrender charge, 3.60 

Deficiency, , . $12.00 

Second Yeah— Gross premium, . . $31.30 

Credit 40 per cent. , . . . . $12.52 

Commissions five per cent. . . 1.56 

Balance against the company, . 8.40 

Interest on two notes, . . . 1.60 

$22.48 $32.80 

$10.32 
Interest, .62 

Cash beginning of year, . . . $10.92 

Cost of insurance, . . . . . $10.30 

Cash on hand, end of year, . . .62 

Surrender charge, 7.33 

Deficiency, 6.71 

Third Yeak — Gross premium, . . . $31.30 

Credit four per cent., .... $12.52 

Commissions, 1.56 

Balance last year, .62 

$14.08 $31.92 

Cash beginning of year, . , . $17.84 

Interest on reserves, .... 1.('7 

Interest on three notes, . . . 2.25 

$21.16 

Cost of Insurance $10.41 

Cash on hand, 10.75 

Surrender charge, 11.17 

Deficiency, .42 



FOR LIFE AGENTS. 123 

It is clear from these last illustrations that parties in- 
sured, who have received credit for a large part of their 
premiums, cannot reasonably expect any surrender 
value in cash for their whole life policies. 

The relation which a premium note or loan holds to 
the policy is not generally understood by the insured 
when he wants a surrender value. After paying seve- 
ral premiums, one half or 40 per cent, on credit, the 
policy-holder concludes he will get the surrender value 
of his poUcy and give it up. He writes to the com- 
pany or its agent and is informed that there is no sur- 
render value in excess of the notes or loans on the pol- 
icy. He instantly concludes that he has been swin- 
dled ; that life insurance companies were made for the 
purpose of receiving and not paying out money, and 
perhaps he takes his revenge by denouncing the com- 
pany through the press. He does not know that by 
paying only one half or sixty per cent, cash he has ob- 
tained his insurance at just ab )ut the actual cost — per- 
haps a trifle below it ; that the notes given for premi- 
ums represent the reserve, good as an investment and 
as an interest-bearing asset, although they are of no 
use to pay the losses of another policy-holder, and so 
in fact the company has been loaning him the money 
represented by these notes, and that all this time he 
has been in debt to the company to the amount of 
these notes. 

This is not intended as a defense of the note or loan 
system ; it is simply an explanation of what it is. A 
good thing misunderstood is often no better than a bad 
thing understood. If the policy-holder will only bear 
in mind that the note or loan is so much of the final 
-payment of the policy, whether surrender value, paid-up 
insurance, or death claim, and advanced by the com- 
pany to the insured, the rest will be perfectly clear. 

This view of the subject also shows us why it is 
necessary' to have the policy-holder keep up the pay- 
ment of the interest on the notes of a paid-up policy 
until they are canceled by dividends if any are al- 
lowed. 

Ten Payment Life and E idowment Policies. 

Surrender values are not so frequently demanded on 
these classes of policies, for the reason that paid-up 
policies are usually given after two annual payments 
have been made. In a paid-up policy the insured 
knows he gets a definite amount of insurance for his 
money, but in accepting a promise of a surrender valu« 
he is not so certain. 



124 INSTRUCTION BOOK 

As a much larger premium is required on this class 
of policies it is more likely that they will have a surren- 
der value at the end of the first year, especially in snort 
term endowments. 

- Ten Annual Life Policy— Age 40— $1,000. 



First Year— Gross premium, . . . 
Commission 25 per cent., . . . 
Med. ex. and office expenses, . 

Interest six per cent., .... 

Cost of insurance, 

Casii on hand, 

Surrender charge, 

Surrender value, 

Three fourths of the reserve is $29.45. 
Second Year— Gross premium, . . . 

Commissions five per cent., . . 

Cash on hand last year, . . 

Balance, 

Interest six per cent., .... 

Cost of insurance, ...... 

Cash on hand, 

Surrender charge, 

Surrender value, 

Three fourths of the reserve is $60.22. 
Third Year— Gross premium . . . 

Commissions, 5 per cent. . . . 

Cash on hand last year .... 

Balance 

Interest six per cent. .... 



Cost of insurance .... 

Cash on hand , 

Surrender charge 30.80 

Surrender value $101.58 

Three fourths of the reserve is $92.40. 

The same with 40 per cent. Credit given. 

Dr. Or. 

First Year— Gross premium .... $59.09 

Credit 4U per cent $23.64 

Commissions 25 per cent. . . 14.77 
Medical examination, etc. . . . 10.00 
Interest on note in advance, six per cent. 1.42 

$48.41 160.51 

Balance . 12.io 





$59.09 


$14.77 




10.00 


24.77 




$34.32 




2.06 




$36.38 


9.95 






26.43 


9.82 






16.61 




$59.09 


$2.95 






26.43 


$2.95 


$85.52 




82.57 




4.95 




$87.52 


9.76 






$77.76 


20.07 






$57.69 




$59.09 


$2.95 






77.76 


$2.95 


$136.85 




133.90 




8.03 




$141.93 


9.55 






132.38 



FOB LIFE AGENTS. 125 

Balance— {continued from last page,) $12.10 

Interest -73 

Credit end of the year .... 12.83 

Cost of insurance 9.95 

Casli on baud 2.88 

Surrender charge 9.82 

Deficiency 6.9i 

Three fourths of the reserve would be $29.45. 

Second Year— Gross premium . . . $59.09 

Credit four per cent $23.64 

Commissions five per cent. . . 2.95 

Interest on two notes in advance 2.84 

Cash on hand last year .... 2.88 

$26.59 $64.81 

Balance 38.22 

Interest six per cent. ..... 2.29 

Credit end of the year .... $40.51 

Cost of insurance 9 .76 

Cash on hand $30.75 

Surrender charge 20.07 

Surrender value 10.68 

THrBD Yeae— Gross premium . . . $59.09 * 

Credit 40 per cent $23.64 

Commissions 2.95 

Interest on three notes in advance 4.26 

Cash on hand last year . . . 30.75 

$26.59 $94.10 

Balance 67.51 

Interest six per cent 4.05 

Credit end of the year . . . . 71.56 

Cost of insurance 9.55 

Cash on hand 62.01 

Surrender charge 30.80 

Surrender value 31.21 

In the case of a ten year life policy, after two annual 
premiums have been paid, the company generally 
agrees to give a paid-up life policy of $200 on a policy 
of SI, 000. This at the age 42 would demand a single 
net premium (Combined Experience four per cent. ) of 
$79.84, or a mutual premium of $87.82, while all the 
money the company has to meet this, according to the 
above calculations and without deducting the surren- 
der charge, is $76.48. After three annual payments 
we have the single net premium of $300 = $122.61, and 
a mutual rate is $134.87, while the cash on hand to 
meet this obligation is $130.45. 

In these cases the company is as much entitled to 
a surrender charge as when paying cash surrender 
values. 

From these illustrations it is easy to see that the 
company does not make anything in this class during 
the first three years, by giving paid-up policies of as 



126 



INSTRUCTION BOOK 



many hundred dollars as there have been premiums 
paid on a policy of $1,000. In fact it is a loss to 
the company, while, like many other features, it is sub- 
mitted to in order to promote a feeling of confidence 
and satisfaction among the retiring members. 



Ten Year Endowment— Age 40— $1,000. 
Dr. 
First Ybae— Gross premium. 

Commission 25 per cent. . . . $26.73 
Medical examination, etc. . . 10.00 



Interest six per cent. 



Credit end of the year, 
Cost of insurance, . . . 
Casli on hand end of the year 
Surrender charge, , . . , 
Surrender value, .... 
Which is about 56 per cent. 
Second Year— Gross premium. 
Commissions five per cent.. 
Cash on hand last year, . . 



of 



Balance, .... 
Interest six per cent. 



Credit end of the year, . 
Cost of insurance, . . 



Cash on hand, 

Surrender charge, . . . 
Surrender value, .... 
Three fourths of the reserve 
Third Year— Gross premium, . 

Commission 

Cash on hand last year. 



Balance, 

Interest six per cent. . 

Credit end of the year 
Cost of insurance, . . 

Cash on hand end of the year. 
Surrender charge, . . 
Surrender value, . . . 
Three fourths of the reserve is $188.04, 



9.54 
19.92 
the reserve. 
$5.35 

$5.35 



$36.73 



8.88 



40.79 

$122.37. 

$5.35 



$5.35 



8.16 



62.68 



Cr. 
$106.90 



70.17 
4.21 

$74.38 

64.84 

44.92 

$106.90 

64.84 



$176.37 

$167.49 

126.70 

$106.90 

167.49 

$274.39 

269.04 

16.14 

$285.18 

$277.02 
214.34 



Ten Year Endowment, 40 per cent, credit. 
Dr. 
First Year — Gross premium, . . . 

Credit 40 per cent $42.76 

Commissions, 26.73 

Medical examination and expenses 10.00 
Interest on note in advance, . . 

$79.49 



Cr. 
$106.90 



2.56 
$109.46 



FOR LIFE AQENTiS. 



127 



(Continued from last page.) 








Dr. 


Cr. 






$29.97 


Interest 6 per cent. . . 




1.80 


Credit end of the year, . 




$31.77 


Cost of insurance, . . 


. . . 9.54 




Cash on hand. ... . 




22.23 


Surrender charge, '. . 


. . . 19.92 




Surrender value, . . . 




2.31 


Second Year— Gross premium, 


. . 


$106.90 


Credit 


. . . $42.76 




Commission, .... 


. . . 5.35 




Interest on two notes in advance, 


5.12 


Cash on hand last year, 


. . . 


22.23 




$48.11 


$134.25 


Balance, 




86.14 


Interest 




5.17 








Credit end of the year. 


$91.31 


Cost of insurance, . . 


. . . 8.88 




Cash on hand, . . . 




$82.43 


Surrender charge, . . 


. . 40.79 




Surrender value, . . 




41.64 


Thikd Year— Gross premium, 




$106.90 


Credit, 


. . 42.76 




Commission, .... 


. . 5.35 




Interest on thi'ee notes in 


advance. 


7.68 


Cash on hand last year, 


• . 


82.43 




$48.11 


$197.01 


Balance, 




148.90 


Interest six per cent. . 




8.93 


Credit end of the year, 




$157.84 


Cost of insurance, . . 


. . 8.16 




Cash on hand, . . . 




149.67 


Surrender charge, . . 


. . 62.68 




Surrender value, . . . 


. . 


86.99 



In all the above computations we have made the case 
as favorable as possible to the policy-holder, and if we 
have erred at all, it has been against the companies. In 
more than three fourths of the companies we will ven- 
ture to say that the usual annual and initial expenses 
of a policy are much greater than are here represented. 
It will also be noticed that we have made no charge 
except the commissions for keeping the policy in force 
after it is once issued. The actual cost of insurance 
varies so much in different companies, that we have 
taken only the tabular cost. 

In giving a paid-up policy for $200 on a ten year en- 
dowment of $1,000, after two annual premiums have 
been paid, we have the net single premium for $200 =: 
$139.68, and on the mutual rate, S153.65. The amount 
of cash on hand, according to the above assumptions, 



128 INSTRUCTION BOOK 

leaving out the surrender charge, is $160.35. The third 
year the net single premium for $300 is $230,40, and 
the mutual rate is $253.44 ; the amount of cash on hand 
to meet this is $275.32. It is only by ignoring the sur- 
render charge that the company can afford to give 
paid-up policies in this manner. 

Little gained by Lapsed Policies, 

In investigating this subject we must conclude that 
the companies actually lose money on the aggregate of 
all cash policies which lapse during the first year. In 
the lapse of half note or part loan policies the loss can- 
not be doubted. It is questionable whether they ac- 
tually gain anything on the aggregate of those which 
lapse during the second and third years, for in ail lim- 
ited term policies where the reserve is the greatest, 
paid-up insurance is generally preferred to lapse or 
surrender values. It is perfectly safe to say that, as a 
general rule, a company gains more when the policy is 
kept in force, than by paying three fourths or two 
thirds of the reserve as a surrender value. 

In conclusion, we would desire every agent to say : 
' ' Avoid asking for a cash surrender value on your policy 
if you can possibly help it, unless the amount to be paid 
is distinctly stated in the policy." It is probable that 
not one man in a hundred who takes a surrender value 
for his policy ever thinks he is justly treated, when the 
value is left to be determined at the discretion of the 
ofi&cers of the company, and he accepts what he can 
get with the resolution never to be caught again. And 
we caution our readers against a temptation to which 
many policy-holders are exposed— that of applying for 
a surrender value on a policy already in force, in order 
to allow an agent to transfer them to another company, 
unless the one they are already insured in is totally un- 
worthy of confidence. 

To agents and solicitors we again say, counsel your 
clients to have as little to do with surrender values as 
possible. This is not a legitimate part of insurance, 
and should not be made an inducement for one to take 
a policy unless the company guarantees a specific sur- 
render value, and in all cases give little or no encour- 
agement for one if the party proposes to take a part 
loan or note on his premium. 

In this examination of the subject we have endeav- 
ored to give such information as will dissuade many a 
policy-holder from applying for a cash surrender value 
on his policy, or if it is absolutely necessary, we have 



FOR LIFE AGENTS. 129 

endeavored to prevent them from being disappointed 
and from making unjust charges of extortion against 
the companies when they do not receive all they ex- 
pected. When life insurance becomes better under- 
stood, a,nd the people at large know what they can rea- 
sonably expect of a company, and how to distinguish 
the highly colored statements of interested agents from 
the sober reality of this complicated kind of business, 
then it will be better appreciated, and the disappoint- 
ment about surrender values will be comparatively un- 
known. 




130 INSTRUCTION BOOR 



CHAPTEK XIY. 

DISTRIBUTION OF SURPLUS. 

It is liighly important that the agent should clearlj 
understand this subject in order that he may correctlj? 
explain it when necessary, and especially that he may 
avoid making statements and promises which cannot 
possibly be realized. The public know little or nothing 
about the methods adopted in distributing dividends, 
and on this as well as many other points in life insurance 
they depend almost entirely on the agents for informa- 
tion. 

Premiums. 

The company adopts a table of net premium rates 
for policies of $1,000, according to certain arbitrary 
standards of mortality and interest which long experi- 
ence and attentive observation have shown to be safe 
and trustworthy. In the table of mortality it is assumed 
that out of 100,000 persons living at the age of ten 
years, a certain number will die at each succeeding age 
up to ninety-five or ninety-nine, or the oldest age in the 
table. A rate of interest is assumed low enough to cover 
all probable fluctuations in the value of money, and 
which it is supposed that the invested reserves of the 
company will yield without question. The " net pre- 
mium " is what it would cost to insure each one of the 
whole number of lives in a class of a given age, provid- 
ed there was no excess or deficiency of mortality or 
interest, and no expenses to be incurred. But neither 
the future mortality, interest nor expenses of the com- 
pany can be predicated with any certainty. The com- 
pany can make a careful selection of risks so as to keep 
the mortality ^vithin tabular limits ; it can invest the 
assets at as high a rate of interest as is consistent with 
safety ; it can keep the expenses down within proper 
bounds while using all due energy in prosecuting the 
business ; and then, if there is any surplus left at the 
end of the year, it can distribute it among the policy- 
holders. 

Mortality. 

If no deaths should take place among the members 
of a company in any given year there would be no 



FOR LIFE AGENTS. 131 

losses to pay, but it would not do to distribute the ap- 
parent gains as surplus. This might do in a. fire insur- 
ance company where the policies are renewed from 
year to year, but in a life company, if the actual losses 
were S100,000 less than the expected or tabular mor- 
tality, this amount of loss is simply postponed, and all 
the company gains is the interest on these deferred 
losses which must occur at some future time. The next 
year the losses may be $100,000 greater than the tables 
call for, and it is unwise and unscientific to distribute 
what must eventually be paid. If the number of losses 
is just equal to the tabular limit, but if the average 
amount of each death loss is greater than the average 
amount of the policies, which- is usually the case, a de- 
ficiency is occasioned which must be made up in the 
future. 

Interest. 

The company assumes that the reserves will earn a 
certain rate of interest, usually in this country now, 
four per cent. When the assets are invested in inter- 
est-bearing securities, they usually realize from five to 
six or even seven per cent, but several weeks or per- 
haps months must elapse after a premium is collected 
before it is permanently invested, and in every com- 
pany a large sum must be kept on deposit in the banks 
in order to meet expenses and pay losses, so that the 
actual average rate of interest which will be received on 
the reserve and surplus cannot be predicated with any 
absolute exactness, certainly not till the company has 
had some age and experience. 

The rate of four or four and a half per cent, is gene- 
rally assumed by mutual companies as the basis of all 
their calculations, and is also made the legal standard 
in most States where an official valuation of policies is 
required. Whatever interest on the reserves is realized 
over the standard rate is used to offset any deficiency 
in losses or expenses, or if none of these exist, then it 
is considered as surplus. 

Margin or Loading. 

The company having decided what shall be the net 
premium, adds a loading or margin for expenses, ex- 
cessive losses, etc. Since these cannot be predicated 
tvith any certainty, but only on the law of average and 
past experience, it is highly important that the com.pa- 
Qy should proceed with great care in making contracts 
which are to last for a numbe'- of years. In a mutual 



:i32 INSTRUCTION BOOK 

company, each one of tlie policy-holders is bound to 
pay the losses as they occur to the extent of the premi- 
ums on his policy , but no farther. It is highly import- 
ant then that the premiums should be large enough at 
the outset, as it is impossible to increase them after- 
ward on policies already in force. Safety to the policy- 
holder is one of the most important considerations in 
life insurance, and the company must charge enough a1 
the acceptance of a risk to make it a safe transaction 
amid all the vicissitudes of future years. 

This is not peculiar to life insurance. Fire insur- 
ance companies add a margin to their premium rates to 
provide for the losses occasioned by extraordinary con- 
flagrations, and marine and accident insurance compa- 
nies also adopt a similar rule. In all insurance compa- 
nies solvency is of the highest importance, and this 
«an only be obtained by having premiums large enough 
to cover losses and expenses. 

Whatever excess there is in the margin above ex- 
penses and other claims upon the company (including 
dividends to stockholders, if any) is surplus. Since 
the margin is paid at the beginning of the insurance 
year with the premium, and the dividends are de- 
clared at the beginning of subsequent years, the actual 
rate of interest upon the unexpended part of the pre- 
mium must be added to it in finding the surplus from 
this source. 

We have then three principal sources of surplus gains 
— from deferred mortality, interest, and loading. There 
may also be other sources, such as profits realized on 
the sale of securities, sales of real estate, rents of build- 
ings, profits from lapsed policies, etc. Whatever gains 
there are from these miscellaneous sources, should be 
added to the former items. 

Period of Distribution. 

Until within late years many companies divided 
their surplus once in three or five years. This practice 
allows the surplus to accumulate, and in case of any 
extraordinary losses, here is a resource to which the 
company can apply ; for until the surplus is actually dis- 
tributed, it is ^nlTJect to the claims of the company. 

Most of the English companies distribute their sur- 
plus once in thi'oe, five or seven years, the most com- 
mon period being five years. The Equitable Life As- 
surance Society, established in 1786, did not distribute 
any surplus during the first twenty years, and since that 
period it has divided it at decennial intervals. 



FOB LIFE AGENTS. 133 

The principal argument in favor of division at long 
intervals is that in some years the mortality is much 
greater among policy-holders than in others, and it is to 
avoid the irregularities which must necessarily appear 
in annual distributions that these longer periods are 
chosen. 

This practice is eminently safe and conservative ; too 
much so for the competition and rivalry of our compan- 
ies at the present day, and the annual distribution oi 
the surplus, commencing on the payment of the second 
or third premium, is generally adopted. 

Methods of Distribution. 

The principal methods of distribution used in this 
country are : 

Percentage on premiums paid. 

Percentage on reserves. 

The coutribution plan. 

Percentage plan. Until within late years the per- 
centage plan was the one in universal use. It is per- 
formed by Leturning, usually four years after the pre- 
mium is paid, a certain proportion or ratio of that pre- 
mium. It is the plan usually adopted by the English 
companies at the present day, and some companies in 
this country stiU adhere to it, either wholly or in part. 
When the policies were nearly all on the whole life 
plan, with few or no endowments, the want of equity in 
it was not then so clearly manifest. But when different 
kinds of premiums have arbitrary rates of loading, or 
when premiums are computed on different mortality 
tables and rates of interest, the inequality of dis- 
tribution becomes clearly manifest. A uniform percent- 
age of surplus is not earned, and therefore cannot be 
returned without robbing some policy-holders to the 
benefit of others. In practice, however, the percent- 
age plan was productive of considerable satisfaction 
among those companies where the half note system 
prevailed. A uniform percentage of surplus and hall 
credit premiums brought the insurance down to verj 
nearly the net cost, and was practically carrying out the 
stock plan. It had this advantage, that it was usualh 
regular from year to year, and people depended upon it 
with little fear of disappointment. When the science 
of life insurance came to be more studied, it was seen 
that there were some radical defects in it. It failed to 
do equal justice to endowments, hmited term life, and 
whole life policies ; to some it gave too much surplus 
and to others too little. Besides, the increasing ex- 



134 INSTR UCTION BOOK 

penses of companies made it impossible to pay so large 
a dividend during the first years of a policy without 
invading the reserve fund. For these and other reasons 
the old companies have generally abandoned it, and the 
new companies have never adopted it. 

Percentage on reserves. This plan has been adopted 
bi a few companies, but has not come into general use. 
It is claimed that if the premiums are all computed on 
the same table of mortality and interest, and have the 
same loading, then this plan gives an equitable distribu- 
tion. It is much more easily understood than the con- 
tribution, and more equitable than the percentage plan. 



The Contribution Plan. 

Our remarks upon "Premiums, Mortality, Interest, 
Margin or Loading, " etc. , may be considered as prelim- 
inary to an examination of the ' ' Contribution Plan " of 
dividing surplus. This method was first applied to the 
distribution of surplus by Mr. Sheppard Homans, for- 
merly actuary of the Mutual Life Insurance Company 
of New York, It was used for the first time in 1863 in 
the distribution of the quinquennial dividends of that 
company, and it has since been adopted by most of the 
American companies. 

It is so called because each item of excess in inter- 
est, loading, etc., is made to contribute its own propor- 
tion on each policy to the sum total of the surplus. It 
enables the company to keep an account of all the 
sources of income and items of expenditure on each 
policy, and every policy-holder has his share of the 
surplus credited to him at the end of each insurance 
year. 

Since many companies make the " gain from vital- 
ity," or the excess of tabular over the actual mortality, 
a source of surplus, we will explain how this is done, 
although we have stated our reasons for regarding it aa 
unscientific and unsafe. 

Cost of insurance. According to the Combined Ex- 
perience Table of Mortality and four per cent, inter- 
est, a man aged 45, insuring on the whole life plan for 
$1,000, at the end of the fifth year has a reserve on hi? 
policy of $93.34. This is his "self-insurance," as Hon. 
Elizur Wright calls it, or the amount which he has on 
deposit with his company, and it is the amount for 
which he insures himself — the balance ; or $1,000 — 
93.34 = 906.66 is the amount which the company as- 
sumes as a risk ; that is, the whole amount of the policy 
is divided, the policy-holder insuring himself to the 



FOR LIFE AGENTS. 



135 



amount of his reserve and the company insuring the 
balance. These two quantities are continually chang- 
ing, and are seldom the same two days in succession, 
but for the sake of convenience and uniformity we take 
the value of the policy at the end of the year. At the 
end of four years, what is the probability that the com- 
pany will have the 906.66 to pay duiing the coming 
year, or what is the cost of insurance ? The probabil- 
ity by the Combined Experience Table that he will die 
during the fifth j^ear is found by dividing the tabular 
number of deaths at the age 49 by the tabular number 
of living, or ^^^^-q ; that is, out of 70,580 persons living 
at the age 49, 1,063 will die before the year ends, or 
the probability that any one of these persons will die 
is T^P^^^o =-^15061, and the risk that the company 
runs of losing a dollar under these circumstances is one 
cent, five mills and a fraction. The amount of risk 
which the company assumes of losing 906.66 during 
the year, is 906.66 X .015061 = $13.65, which is the 
tabular cost of insurance, which is found by deducting 
the reserve at the end of the year from the amount in- 
sured and multiplying the difference by the probability 
of dying that yeai-. 

The following table, based upon the Combined Ex- 
perience Table of Mortality and four per cent, interest^ 
gives an illustration of the cost of insurance on a policy 
of $1,000, issued on the whole life plan at the age 
45. If the actual mortality is only three fourths of the 
tabular rate, the last column shows what is sometimes 
distributed as " gains from vitality :" 



tear of 
Policy. 



Amount 
at Risk. 



Probability 
of dying. 



roRt nf I Gains frm 
iusur ce. ^ ^. ^^^ ^^^ 



S18.01 


0981.99 


36.36 


9(i3.64 


55.01 


944.96 


74.0.3 


925.97 


93.34 


906.66 


112.94 


8o7.06 


132.80 


867.20 


152.91 


847.09 



7 4 4 ;i 5 
_ii4.i_ 
7352 6 
_viij._ 
72 5 82 

7 1 bill 

6840? 
.12.111. 
6T253 



$11.99 
12.37 
12.77 
13.20 
13.65 
14.14 
14.65 
15.20 



$3.00 
3.09 
3.19 
3.30 
3.41 
3.53 
3.66 
3.80 



111 the following illustration we have a policy isi^ued 
un the whole life plan at the age of 45 for $1,000. The 
explanation of the Contribution Plan is based upon the 
following assumptions : 

1. The net premiums, reser.ves and cost of insurance 
are computed on the Combined Experience Table of 
Mortality and four per cent, interest. 



136 INSTEUCTION- BOOK 

2. The average expenses of the company are 15 pel 
cent, of the gross premiums. 

3. The average interest realized on the assets is six 
and one half per cent. 

FIRST TEAB. 

First Source.— From loading. 

Gross premium, $37.97 

Net premium, 28.85 

Loading $9.12 

Expenses, 37.97 X -15 = 5.70 

Difference $3.42 

Interest 6^ per cent. .... .22 

Surplus from loa^Tir,,v $3.64 

Second Source. — Interest on reserves. 

Keserve at the end of first year, $18.01 

Difference between actual and 
assumed rate of interest 6j^ 
— 4 = 21^ multiplied by re- 
serve, 18.01 X -021^, .... — .45 

Total surplus from tbese two 
sources at the end of the first 
year, 3.64 + 45 = . . . . $4.09 

SECOND YEAR. 

First ^ottrce.— Surplus from loading same as before, $3.64 
Second Source.— Interest on reserves, 36.36 X -02 >^, .91 

Total surplus, $4.55 

THIBB YEAR. 

i^rsi AS'oM?-ce.— Surplus from loading, . $3.64 

Second Source. — Interest on reserves, 

55.04 X -02)^ = 1.38 

Total surplus $5,02 

FOURTH YEAR. 

First Source. — Surplus from loading, $3.64 

Second Source.— luterest on reserves, $74.03 X •02^ = 1-85 

Total surplus, $5.49 

FIFTH YEAR. 

First Source. — Surplus from loading, $3.64 

Second Source.— Intevest on reserves $93.34 X -02)^ = 2.33 

Total surplus, $5.97 

SIXTH YEAR. 

First 5'oiirce.— Surplus from loading, $3.64 

Second .S'oMrce.— Interest on reserves $112.94 X -025 = 2 82 

Total surplus, $6.46 

SEVENTH YEAR. 

First Source. — Surplus from loading, $3.64 

Second Source.— Interest on reserves $132.80 X -025 = 3.32 

Total surplus $6.96 



FOR LIFE AGENTS. 



IS' 



EIGHTH YEAR. 

First Source.— Surplus from loadiug. $3.64 

Second Source.— InteveBt on reserves $152.91 X -025 = 3.82 

Total surplus $"7.^6 

This illustration is simply designed to show the me- 
thod of finding the surplus, and the assumptions are 
entirely arbitrary. In practice many other items may 
come in to vary these results, such as profits on invest- 
ments, gains from lapsed policies, a low rate of com- 
mission in collecting renewals, and should the mortali- 
ty in any given year be excessive, the excess should be 
deducted from the loadiug. 

Application of Surplus. 

KEDUCTION OF NET ANNUAL PREMIUM. 



Year. 


Gross 
Premium. 


Kedac- 
tion. 


Balance. 


First year's premium 


$37.97 




$37.97 


. Second " " 


37.97 


$4.09 


33.88 


Third " 


37.97 


4.55 


33 42 


Fourth '• " 


37.97 


5.02 


32 95 


Fifth " 


37.97 


5.49 


32.48 


Sixth •' 


37.97 


5.97 


32.00 


Seventh 


37.97 


6.46 


31.51 


Eighth " 


37.97 


6.96 


31.01 


Ninth " 


37.97 


7.46 


30.51 



Reversionary Insurance, or Additions to the 
Policy. 

The amount of reversionary insurance which the sur- 
plus will purchase is found by dividing it by the n t 
single premium of $1 for the present age of the policy- 
holder. For the sake of simplicity we take the net sin- 
gle premium. 



First year, amount insured 




= 


$1000.00 


yecona •• " " 


$1000.00 -L (4,09 - 


- .43886)= 


1009.32 


Third " 


1009.32 + (4.55 - 


- .44935)= 


1019.45 


Fourth " 


1019.45 + (5.02 - 


- .46002)= 


1030.36 


Fifth 


1030.36 4- (5.49 - 


- .47088)= 


1042.02 


Sixth 


1042.02 + (5.97 - 


- .48091)= 


1054.41 


Seventh " 


1054.41 -f- (6.46 - 


- .49311)= 


1067.51 


Eighth " 


1067.51 + (6.96 - 


- .50446)= 


1081.31 


Ninth " 


1081.31 + (7.46 - 


- .51595)= 


1095.77 



There will also be a small amount of additional insurance de- 
rived from Ihe surplus of the paid-up insiu-ance ; but it was not 
deemed besi \o puzzle the reader with it. 



Parchasr of Term Insurance. — The surplus can also 
be applied (o the purchase of term insurance for one or 
more years. In the example which follows, we use the 
reserve to purchase single premiums of term insurance 
for seven years. At the age 46, $1 of term insurance for 



138 



INSTRUCTION BOOK 



seven years will cost .086671, and the first dividend of 
$1.09 will purchase $47.19 insurance. At the age 47, 
$1 term insurance for seven years will cost .091507, 
and the dividend, $4.55, will insure $49.72 for that time. 
The following plan will illustrate this method : 



Age. 


Sing. prem. 
to insure 

$1 for 7 yrs. 


Surplus. 


Term insur- 
ance, 7 yrs. 


Amount of 
policy. 


45 








$1000.00 


46 


.086671 


$4.09 


$47.19 


1047.19 


47 


.091507 


4.55 


49.72 


1096.91 


48 


.096736 


5.02 


51.89 


1148.79 


49 


.102398 


5.49 


53.60 


1202.39 


50 


.108531 


5.97 


55.01 


1257.40 


51 


.115131 


6.46 


56.11 


1313.51 


52 


.122250 


6.96 


56.93 


1370.44 


53 


.129903 


7.46 


57.39 


1380.64 



Up to the age 52, the increased insurance of each 
year is added to the policy. At the age 53 the iusu- 
ranee, $47.19, added at the age -46, having been in force 
seven years, is deducted and $57.39 added. 

This plan enables the policy-holder to get a much 
larger amount of insurance on his life during the ear- 
lier years of his policy than by reversionary insurance. 
By this method his additional insurance at age 53 is 
$380. 64, while if the dividends had been used to pur- 
chase reversionary insurance it would have amounted 
to only $95.77. 

The following table will show what will be the result 
if the surplus is applied to the purchase of term insu- 
rance for one year : 



Age. 


Sing. prem. 

to insure $1 

lor 1 year. 


Surplus. 


Term insur- 
ance, 1 year. 


Amount of 
policy. 


45 










46 


.012345 


$4.09 


$331.31 


$1331.31 


47 


.012996 


4.55 


350.11 


1350.11 


48 


.013711 


5.02 


366.13 


1366.13 


49 


.014482 


5.49 


379.09 


1379.09 


50 


.015326 


5.97 


389.54 


1389.54 


51 


.016248 


6.46 


397.59 


1397.59 


52 


.017257 


6.96 


403.31 


1403.31 


53 


.018359 


7.46 


406.34 


1406.34 



Advantages and Defects. 

In every different method of applying the surplus 
there are some advantages and some disadvantages 



FOE LIFE AGENTS. 138 

which the agent will readily see by observing these ta* 
bles. In the first method, the premiums are gradually 
reduced each succeeding year, and the insuied has the 
less to pay the longer he lives, while the sum insured 
remains the same. In the second method, the amount 
insured increases gradually during life, and if the con- 
tingency should occur that the insured should be una- 
ble to pay his regular premiums, this amount of sur- 
plus thus accumulated can be used in some companies 
to keep his policy in force, or when the accumulated 
cash value of the surplus and the reserve is equal to 
the single premium at the increased age of the poli- 
cy-holder, he is entitled to a paid-up policy for the 
original amount. In the third and fourth methods, the 
temporary increase of the policy, the policy-holder 
expends the whole amount of his surplus each year in 
purchasing new insurance, and consequently there is 
no reduction of premiums. He gets a larger amount 
of insurance at first, but it is not uniform during life. 
If he suspects that he is destined to live but a few 
years, this is the most profitable plan for him to 
choose. 

Tontine Insurance. 

A tontine is the oldest form of a life contingency. 
The original plan of a tontine was for a number of per- 
sons to subscribe a sum of money to a common fund, 
and the interest was divided annually among the survi- 
vors, the last survivor receiving the whole of the fund. 
The fundamental idea which lies at the base of all ton- 
tines is that the survivors get all the profits which have 
accrued up to the period of division. In the ai^plica- 
tion of this principle to the distribution of surplus, the 
same law is observed : the survivors and those who keep 
their policies in force obtain the whole of the reserves 
and surplus of those who allow their policies to lapse, 
and the surplus of those who die before the period of 
its distribution. 

The principal features in the plan, as originally 
adopted by some American companies, were as follows: 

" Tontine policies issued in each year are to be kept 
in distinct and separate classes, in which the surplus 
remains with the company for ten, fifteen or twenty 
years, to be accumulated for the sole benefit of the 
surviving members, among whom it is to be divided ex- 
clusively at the end of the stipulated time. 

"The insured chooses at the time of application 
whether he will enter the ten year, the fifteen year, or 



UO INSTRUCTION BOOR 

the twenty year class, but can make no change from 
one class to another after the issue of his policy. 

"In case of death within the tontine period, the 
amount of insurance only will be paid, without allow- 
ance for accrued surplus." 

Persons discontinuing their payments during the 
tontine period will receive no surrender value or paid- 
up policy, but forfeit the same, together with the accu- 
mulated surplus. 

" The usual thirty days' grace is allowed for thepaj'- 
ment of premiums, with, however, a fine at the rate of 
10 per cent, per annum when this grace is accepted. 

" No policies can be restored alter forfeiture on any 
account whatever. 

" At the end of the tontine period the fund accumu- 
lated to the credit of the class is divided among the re- 
maining members. Each member has the option of 
withdrawing his share in cash, applying it to purchase 
a paid-up policy, or, if he is desirous of continuing his 
insurance, the surplus over what is necessary as a re- 
serve, and to pay the premium then due, may be em- 
ployed to secure an annuity toward paying subsequent 
premiums." 

The tontine policy becomes a triple " bet" on the 
part of the insured. As in the ordinary form of life 
policy, he bets that he will die during the year, and 
puts up his premium on the result. In the second 
place, he bets that he will live till the period of distri- 
bution of surplus, and stakes his share of it on this re- 
sult. In the third place he bets that he will be pros- 
perous enough to pay his premiums promptly, and 
pledges both his surplus and his reserve on the issue. 
Just so far as the first bet is the proper and legitimate 
one in life insurance, so far the second is contrary to it, 
and the third is introducing an entirely foreign element 
into the plan. Whether all three of these incongru- 
ous elements are for the ultimate advantage of the 
policy-holder, he must decide for himself. 

The principle of the tontine is now often modified by 
the sabstitution of semi-tontine plans in which the 
member who is unable or unwilling to keep his con- 
tract alive forfeits only a part of the funds reserved to 
his credit. Just so far as the substituted plan departs 
from the original, the views here expressed regarding 
the latter, must be correspondingly modified. 

It is not strange that tiiis plan of insurance should 
have attractions for many, especially those who see 
only the prospective gains which each policy-holder 
feels sure he is destined to win. Before a man takes a 



FOR LIFE AGENTS. 141 

policy of this class, he should seriously consider whe- 
ther financial prosperity has not as many contingen- 
cies as human life, and which carries the greater risk, 
he or the company. He who proves himself strong 
enough in the purse to win at last, will obtain a hand- 
some return for his investment, especially if commercial 
panics or a general stagnation in business should com- 
pel many others to abandon their policies. 

While the advantages of this plan to those who suc- 
ceed in keeping their policies in force are undeniable, 
since they are absolutely certain to realize a larger pro- 
fit than by other plans, there are some defects in it 
which the policy-holder ought to know. 

The fundamental idea of an ordinary life insurance 
contract is that the company assumes the risk of pay- 
ing the amount insured for an annual compensation, 
while all the risk which falls upon the policy-holder is 
only the difference between the reserve and the surren- 
der value of the policy in case it should lapse. But in 
this plan, the policy-holder gets no annual compensa- 
tion for the risk he assumes that all his surplus and re- 
serves may be forfeited by non-payment of premium]; 
it is only in case that he ' ' endures to the end " that he 
is rewarded. There is an inequality in the actual amount 
of risk covered by these two parties. In the nineteenth 
year of the pohcy, according to the*table, page 142, the 
reserve is $209.84, and the surplus is $655.79, making 
$865.33,' which the policy-holder is liable to lose unless 
he pays $19.89, while all the risk the company assumes 
this year is $1,000 — $865.63 = $1^4.37. Under the 
semi-tontine plan, however, the amount of self-insur- 
ance thus carried ^by the policy-holder is of course 
reduced. 

On the part of the companies, however, this plan has 
the tendency to check the great, and in many instances 
unnecessary lapsing of policies, and so far as it holds 
people to the obligations they have assumed and the 
contracts they have made with the company, so far it 
will be a benefit to hfe insurance, and as the policies 
are prevented from lapsing, the average mortality of the 
company is lessened, for the principle of self-selection 
which the pohcy-holders adopt, uniformly operates 
against the company. 

In the following table we have given an illustration of 
the practical working of this plan, based upon certain 
assumptions which may or may not be reahzed after ten 
or twenty years of practical operation. As this pla^ 
has only been recently introduced into this country, it 



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FOR LIFE AGENTS. Ua 

is proper to add that all calculations and assumptions 
about the prospective profits are based upon the ordina- 
ry experience of policies, and not from the practical op- 
eration of the tontine plan itself. 

EXPLA^^ATION Off THE TABLE. 

A, the age of the policy-holder during the successive 
years of the policy. 

B, the number of policies in force each year. 

C, the number of lapses which take place during 
each year. 

D, the annual death claims. 

E, the gross amount of premiums received each yeai 
from policies m force. 

F, the annual expenses, 50 per cent, first year, 20 
per cent, second year, and 10 p^' cent, thereafter. 

G , the annual premiums less expenses. 

H, the fund accumulated at the beginning of each 
year. 

\, interest on the fund at 7 per cent, per annum. 

d , the amount of the fund with interest. 

K, the fund at the end of the year less the death 
losses. 

L, reserve on the policies in force, Combined Expe- 
rience four per cent. 

M , surplus at the end of each policy year. 

N, surplus which is credited to each policj^-holder. 

At the age 25, 1,000 persons insure ; at the end of the 
year, 75 allow their policies to lapse, and there are 
eight death losses of $1,000 each. The amount of pre- 
miums received during the first year is $19,890, and 
allowing 50 per cent, for expenses, the net premiums 
are $9,945. This amount, accumulated at 7 per cent, 
interest, which is $696.15, is $10,641.15. Deducting 
$b,000 death losses, we have the remainder, $2,671.15, 
which is less than the reserve, and there is a defi- 
ciency. 

The next year, at the age 26, 917 premiums are paid, 
amounting to $18,239.13, 69 pohcies lapse, and there 
are $8,000 death losses. Allowing 20 per cent, for ex- 
penses, which amounts to $3,647.83, we have left 
$14,591.30, which added to the $2,641.15 in column K, 
makes $17,232.45. The interest in this at 7 per cent. 
is $1,206.27, and the total fund is $18,438.72. De- 
ducting $8,000 losses, the remainder is $10,438.72, 
which is still less than the reserve. 

The third year, allowing ten per cent, for expenses 
in this and each subsequent year, we have in column 



144 INSTRUCTION BOOK 

G $15,036.84 net premiums, which added to the fund 
of last year in column K ($10,438.72) makes the fund 
at the beginning of the third year to be $25,475.56, 
adding $1,783.29 interest, it amounts to $27,258.85, 
and deducting $7,000 losses, there is remaining $20,- 
258.85, which leaves a surplus, after deducting the re- 
serve, of $19,790.40, of $468.45. K the reserve should 
be distributed among the 774 policy-holders who keep 
their policies in force, the share to each one would 
be .61. 

At the end of the tenth year, the surplus amounts to 
$55,657.30, which divided among 463 policy-holders, 
the number which keep their policies in force, we have 
$120.43 as the share of each. This amount, converted 
into paid-up insurance, would amount to $353.59. 

At the end of the twentieth year we have $193,405 70 
surplus, which divided among 251 policy-holders who 
remain, gives to each $770.54. This, converted into 
paid-up insurance, would add $1,798.10 to the policy, 
making the sum insured $2,798.10. 

This surplus may be converted into an annuity 
(Combined Experience four per cent. ) in addition to a 
paid-up policy, in the following manner : 

Eeserve end of twentieth year, .... $209.84 
Surplus dividends, 770.54 

Total, $980.38 

Single premium, age 45, 428.57 

Surplus on paid-up policy, $551.81 

Present value of annuity of $1 14.8571 

Annuity which the surplus wiU purchase, . 37.14 

which is nearly twice the annual premiums hitherto 
paid. 

If a man wishes to speculate on this kind of insur- 
ance he has only to take out a policy on this plan and 
♦' hedge" his payments by purchasing a term annuity 
for the prescribed number of years. The present value 
of a term annuity $19.89 for twenty years (Combined 
Experience 4 per cent.) is $262.24, but his reserve ia 
$209.84, and his surplus $770.54, making $980.38, which 
equals $262.24, invested for twenty years at compound 
interest at a rate a Httle less than seven per cent, so 
that he has kept his hfe insured and made nearly seven 
per cent, on his investment. If he purchases an annu- 
ity for $226.84, (American Experience seven per cent.,) 
then he would make nearly eight per ccHt. and keep his 
life insured, without incurring any risk that his policy 
would lapse. 



FOR LIFE AGENTS. I4f 



Savings Bank Life Insurance. 

This plan of insurance was presented and advocated 
by Hon. Elizur Wright, the prominent teature of which is 
the guaranteeing of a fixed surrender value at the end 
of each year of a pohcy. To find the surrender value 
of a pohcy on this plan, the present value of the future 
cost of insurance on the policy is computed, and eight 
per cent, of this is adopted as the surrender charge, 
which, subtracted from the reserve, leaves the surren- 
der value. 

In all its prominent features it is precisely the reverse 
of tontine insurance. It does not hold out the induce- 
ment of large dividends, for the premiums are loaded a 
very little above net rates, and the surrender value of 
the policy, which can always be known by referring to 
it, makes it a safe collateral for any purpose. After 
paying the necessary expenses and losses, whatever sur- 
plus remains is distributed annually on the contribution 
plan. 

In this plan the attraction is the surrender value, 
and as all members of the company who adopt this form 
of insurance have equal rights, the usual objections to 
paying large surrender values do not apply here. No 
' risk is incurred by the policy-holder lest his dividends 
and reserve may be forfeited by the non-payment of 
premiums. As a savings bank, the company becomes a 
iafe depository of an annual premium , the reserve of 
which is accumulated at a stated rate of interest during 
the period of insiu'ance, and can be withdrawn at any 
time by paying a small surrender charge ; as an insur- 
ance company, it insures his life to the amount of the 
pohcy, payable at a certain age if living, or at death if 
this event should occur before the period of insurance 
expires. 

The method of computing the surplus and surrender 
values is illustrated in the table, page 147, and ex- 
plained by Mr. Wright. 

By this plan the insurance done by the company and 
the self-insurance by the policy-holder are kept sepa- 
rate. " The self-insurance department is a contract 
between the company and the individual, in regard to 
which, except as to the interest on the deposits beyond 
four per cent., the other members of the company have 
no concern whatever, any more than one depositor in 
a savings bank has with another. The deposits with 
four per cent, interest are the property of the deposi- 
tor. They have no )fiect on the insurance whatever; 
except to diminish the amount. There is no forfeiture 



146 mSTR UCTION BOOK 

here for the violation of any condition. Here the par- 
ty contracts to pay annually the two series of sums con- 
tained in the first and second columns. The " constant 
margin '' of the first column for insurance expenses and 
extraordinary or unexpected death claims. The "normal 
cost of insurance " in the second column is to pay the 
ordinary cost of carrying for one year the risk placed 
against it in the third column. The ** insurance valuo " 
in the fourth column is the present value of the current 
and all future "normal costs of insurance" in the sec- 
ond column. The surrender charge in the fifth column 
is what the party forfeits by violating in any way or 
terminating at his option this insurance contract. It Is 
the indemnity which the company is to receive for its 
loss of insurance value or strength by the non-fulfill- 
ment of its contract. Of course the savings bank "re- 
serve " is the only security the company has for the 
payment of this indemnity, and it is always sufficient 
for that purpose, except at the end of the first and 
sometimes the second year of policies of very long 
term. The " surrender value " is the diflference between 
the reserve and the charge for canceling the insurau ■:« 
part of the contract. 




FOR LIFE AGEXTS. 



147 



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^ ^ ^ ^ ^ 

ri^ CO to H-» o 


CO CO CO CO CO 

CO oc -q o en 


Age of 
person. 


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'. b o b b b 

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^ ^ *^ 'i5 S8 


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b b b b b 

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o 


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re ^^ 


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257.04 
317.0.-, 
370.01 
443.96 
512.13 


$47.03 

96.22 

147.65 

201.53 




b 


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92.10 

143.99 

198.33 


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lid imTB UGTION BOOK. 



CHAPTER XV. 

- THE LAW OF LIFE INSURANCE 

In this chapter we propose to give a summary of the 
leading principles of law which apply to life insurance 
companies and their agents. It is highly important 
that the latter should have a general idea of their legal 
relations to the company and their responsibilities to 
it, as well as of the obligations and privileges of the 
policy-holders. We shall first give an outline of gene- 
ral principles and then practical illustrations and di- 
gests of decisions. 

It is hoped that a perusal of this chapter will enable 
Rgents to avoid many acts which, through ignorance or 
negligence, lead to vexatious litigation or the payment 
Jrf claims which ought never to have been incurred. 
Life insurance companies naturally avoid litigation, 
and it often happens that they pay unjust claims rather 
than go into court. Juries are not apt to find verdicts 
in their favor if they can help it, and the tendency of 
recent decisions, as will be seen hereafter, is to hold 
the companies strictly responsible for the acts of their 
agents. This subject has an additional importance 
when we consider that the companies depend upon 
agents scattered throughout the different States, for 
nearly all their business ; the officers have little or no 
acquaintance with them, and yet the companies are 
held legally responsible for all their acts done in the 
prosecution of their business. How important it is, 
then, that in making contracts involving the payment 
of thousands and millions of dollars, that the agent 
should have some knowledge of the legal bearings of 
his actions. 

The Company as a Corporation. 

A life insurance company is a corporation, and as 
such it is "an artificial being, invisible, intangible, and 
existing only in contemplation of law. Being the mere 
creature of law, it possesses only those properties 
which the charter of its creation confers upon it, either 
expressly or as incidental to its very existence." It has 
also certain general powers which are incident to it ; it 



FOR LIFE AGENTS. 149 

Das a name by which it is known and called, and by 
wmch it is to transact business ; it has perpetual suc- 
cession, that is, the members have power to fill vacan- 
cies by election ; if it has a stock capital, its shares are 
transferable to assignees and are considered as persona} 
property. In its corporate name it can sue and be 
sued, buy and sell, and do all acts such as natural per- 
sons may, within the limits of its charter. It has a 
common seal as evidence of its corporate acts ; it hag 
the power of making by-laws or private statutes for its 
own government, and for the regulation of its business, 
but these by-laws must be in accordance with its char- 
ter. It has also the power of appointing certain officerg 
and agents to manage its affairs and by whom alone its 
business can be transacted. By common law, corpora- 
tions must appear by attorney to defend or prosecute 
suits at law, and many States require foreign Life com- 
panies to appoint an attorney to accept service, and 
against whom a suit may be brought in the name of the 
company. A corporation may be dissolved by the 
death of all its members, by the suiTcnder of the fran- 
chise into the hands of the legislature, or by a forfeit- 
ure of its charter by negligence or abuse of its powers 
and privileges. 

The Agent— Powers and Duties. 

An agent is a person appointed by another to tran- 
sact business for him, and the person who employs him 
is called the principal. Both principal and agent may 
be firms or coiporations as well as persons. 

A general agent is one appointed to transact all the 
business of the principal of a particular kind, and will 
bind the principal as long as he keeps within his gene- 
ral authority, although he may act contrary to his pri- 
vate instructions. 

A special or particular agent is one constituted for a 
special purpose, under a Umifed and circumscribed 
power, and cannot bind his principal by any act not 
within his real or apparent aiithority. 

An agent cannot delegate to a third person power to 
act for him except in a clerical way unless he has 
special authority from the principal. 

The act authorizing the appointment of an agent may 
be either oral or in writing ; an oral or unwritten au- 
thority will authorize a written exercise of it, and a 
written authority will authorize the execution of an in- 
strument not under seal, but to execute a sealed instru- 
ment, the party acting must have sealed power or au- 
thority. 



160 INSTRUCTION BOOK 

If a company approves of the acts of one in the capa- 
city of agent, or retains the advantages of them, it will 
be bound by them although it gave him no special au- 
thoriy to act for it. 

Svery act of an agent within the apparent scope of 
his-authority will be binding upon the principal, for, as 
third persons cannot be supposed to know the agree- 
ment between the parties, and can judge only from ap- 
pearance, the agent shall be presumed to transact the 
business in which he is ostensibly engaged. No secret 
instructions or private agreement between them can af- 
fect the rights of others, and though the authority 
should be revoked, the principal would be liable to an- 
other contracting with the agent, without notice of 
the revocation, at least till proper notice had been 
given. 

The principal is responsible in civil actions for the 
acts of his agent, within the apparent scope of his 
authority and if the agent is guilty of any fraud, wrong 
or neglect, in the course of his business, an action will 
lie against the principal in favor of the party injured. 

These general principles apply to life insurance com- 
panies, and recent decisions are very strong in making 
the companies responsible for the acts and representa- 
tions of its agents and solicitors. The following extract 
fi'om a decision that was rendered by Chief Justice Day 
of Iowa is clear and decisive. In this case the agent 
insured a man whom he knew was addicted to the use 
of intoxicating hquors, and it was held that notice of 
the fact to the agent was notice to the company, al- 
though it was stated in the application that he was a 
temperate and sober man. * 



* Notice to an agent relating to business which he is authorized 
to transact, and while actually engaged in transacting it, will, in 
general, inure as notice to the principal. 

To this view the judicial mind seems rapidly tending, and it ia 
certainly more in accoird with the enlightened and progressive spi- 
rit of the age. These companies select their own agents, require 
them to enter into bonds for the faithful discharge of their du- 
ties, and send them forth provided with blanks and clothed with 
aU the insignia of authority. If their ignorance or their cupidity 
leads them to recommend improper risks, it is more in consonance 
with reason that the loss should be borne by the company than 
that the assured should be made the victim of the incompetency 
or avarice of the agent. More especially is this true in view of 
the fact that the company has the means of indemnity through 
the bond of the agent. 

Just principles of public policy require that these companies should 
he held to a strict degree of responsibility for the acts of their agents. 
They will thus be led to the exercise of greater circumspection in 
the selection of them, and the masses will, in part at least, be re- 



FOR LIFE AGENTS, 161 

The Agent's Relations with the Company. 

In a case where the company claimed that the agents 
I .d forfeited all claim to the agency and renewal com- 
i issions by a violation of their contract, it was held — 

1. That a general agency for a life insurance company 
ih revocable at the will of either party, where no terms 
oi limitation as to time are specified in the contract or 
letter of appointment. 

2. It is also competent for the company to appoint 
other agents for the same territory where no terms of 
exiiusiveness are employed, and such appointment of 
other agents constitutes no ground of complaint, unless 
it bo shown that the business of the first appointee is 
subrftantially interfered with. 

3. If the general agents abandon any part of their 
agency, as for example that part which relates to the 
canvassing for applications, it is in law the abandon- 
ment of the whole agency, including the right to col- 
lect renewals. 

4 If the agent is removed from the company without 
cause, he will still retain his right to collect the renew- 
als, or his commissions thereon, provided he continues 
ready and willing to collect them. 

5. if the agent is guilty of any misconduct or breach 
of duty in his business as agent, or, in other words, if 
he neglects or refuses to fulfill the instructions of the 
company, which form a part of the contract of agency, 
espeoially if he refuses or neglects to remit funds, or 
otherwise make prompt returns as required, oi if he ac- 
cepts another agency and transfers business to it, he 
forfeit <3 all interest in it, and claim to renewals and com- 
missions, and cannot maintain an action on aooount 
theveoi.—Bigelow, Life and Accident Bep., vol, 2, p. 149. 

In another case the doctrine is laid down that if an 
agent should grossly misconduct himself in the course 

lieved from an annoying importnnity which often leads them to 
procure policies without the full concurrence of their judgments, 
and in opposition to their best interests. 

The business of insurance is rapidly increasing in magnitude 
and importance, and it is as essential to the companies themselves 
as to the insured that the rules of law declared applicable to them 
should be based upon just and equitable principles, and adminis- 
tered in harmony with the doctrines of an enlightened jurispru- 
dence. It is quite time that the technical constructions which 
have obtained with reference to contracts of this kind, blocking 
the pathway to justice, and leading to decisions opposed to the 
general sense of mankind, should be abandoned, and that these 
corporations, grown opulent from the scanty savings of the indi- 
gent, should be held to the same measure of responsibility as is 
exacted from individuals.— 2 Bigelow Life and Ace. Rep., p. 698i 



IB'? INSTRUCTION BOOK 

of his agency, and should prove unfaithful to his trust, 
he would forfeit his claim to compensation or commis- 
sion, but his misconduct must be gross and aggravated 
before such consequences would follow ; ordinary or 
slight misconduct would not work a forfeiture of his 
commissions, although it might be a good cause for the 
revocation of his agency. 

It was also shown that the probable expectancy of the 
life of the policies so procured would be from eight to 
thirteen years, and taking all the contingencies of 
deaths and forfeitures into consideration, iney would 
remain in force at least ten years. It was also shown 
that a custom prevailed among insurajice companies 
and agents by which agents acquired a property in lists 
of policies procured by them. 

The contract in this case, however, was entire and 
the agent had a right to the renewal commissions 
during the life of the policies. Where it is termina- 
ble by either of the parties such right ceases on its 
termination, unless otherwise stipulated. 1 Bigelow, 
Life and Ace. , 646. 

If an agent makes a false representation of the affairs 
of the company whereby a person is induced to effect 
insurance, an action will lie against the company, al- 
though no pecuniary damage has been sustained be- 
yond the payment of premiums, because if the agent 
had made his statements according to the truth, th«% 
insurance might not have been effected. 

Insurance Brokers. 

A broker is an agent employed to make contracts in 
matters of trade, commerce or navigation, for a com- 
mission commonly called a brokerage. While a factoi 
may sell in his own name or that of his principal, a 
broker is not intrusted with the possession of what he 
has to seU, nor can he obtain possession of what he it 
employed to purchase, but he merely acts as a middle, 
man or negotiator between the two parties. In life in- 
surance a broker is employed simply to contract for and 
deliver policies to the persons insuring, and to receive 
the premiums due on them ; he has no power to make, 
waive or alter any of the conditions of the policy, and 
in all cases he is bound so to conduct himself in the 
business he undertakes as not to be guilty of gross neg- 
ligence. 

A broker is agent for the insured, and therefore if a 
broker delivers a life policy and collects the premium, 
but fails to pay it to the company, the company will 
not be liable to pay the loss should it occur. But 



BOB LIFE AQENTb, 153 

where the premium is paid to an authorized agent of 
a company, it is liable. — Story on Agency, § 28. 

Such brokers, however, must not be confounded 
with the ordinary soliciting agent who is recognized as 
the agent of the company, whose authority is also re- 
stricted, but for whose acts within the apparent scope 
of such authority the company is liable. 

The Law of Contracts. 

A contract is dejS.ned to be an agreement between two 
or more persons to do or not to do a certain thing. It 
is essential to the vaUdity of a contract to have the as- 
sent of both parties, but if one of the parties is insane, 
under duress or under age, or in any way disqualified to 
give a rational consent, the contract is voidable, but in 
these cases the contract -will bo presumed to be binding 
till the contrary is proved. 

The assent may be either expressed or implied. In 
the latter case, if a person recognizes his contract as 
being in force by any act of his own, even by implica* 
tion. then it is binding. If a company should make a 
condition that a policy on which the premiums were 
not paid on a certain day should be forfeited, and yet 
should contiuue to receive them after the period of pay- 
ment, it might be an implied assent to new terms in the 
contract. * The assent to any part of a contract, or to 
any violation of a part of it, may be tacit as well as ex- 
pressed, and in either case the party wUl be bound by 
his engagement. 

The term implied contract is generally used to denote 
a promise which the law, from the existence of certain 
facts, presumes that a party has made. When a man 
undertakes any office, employment or duty, the law 
supposes that he contracts with those who employ or 
trust him, to conduct with the skill, integrity and dili- 
gence he professes to have, and if through negligence 
or incapacity he fails, the other party has his remedy in 
an action for damages. If a man makes a contract with 
a life insurance company to manage an agency for a 
term of years, and it is agreed that he shall have a com- 
mission on the renewal premiums in the meantime, fail- 
ure through his own fault, to make the agency a profit- 
able one is a sufficient ground to enable the company to 
cancel the contract and deprive him of the future 
renewal commissions. 

An absolute contract is where one party binds himself 
positively, without any conditions to its performance. 



OedsioQS on this point vary in different States. 



154 INSTRUCTION BOOK 

A condUional contract is one in which the obligation de^ 
pends upon the folfiUment of some condition. A Hfe 
policy is a conditinnftl contract, dependent upon the 
truth of certain statemt^ts made in the application, and 
the subsequent obbervaiice of those conditions in the 
policy which forbid his exposing his life in certain dan- 
gerous occupations or practices which shorten life. 

It is essential to a contract that it be founded on a 
sufficient and lawful consideration. A mere voluntary 
offer to do a thing is not a contract. Something must 
be given in exchange between the parties— there must 
be some mutuality in the bargain to make it binding. 
This rule applies to all contracts and agreements not 
under seal, with the exception of bills of exchange and 
negotiable notes after they have been negotiated. It is 
not necessary that the consideration be something tan- 
gible ; any damage, or suspension, or forbearance of 
right, or a promise to do a thiug in a certain contin- 
gency, or a mutual promise, is a sufficient considera- 
tion, provided the mutual promises are concurrent in 
point of time. A promise by a company to pay a sum 
of money to the heirs of the insured in case of his 
death is a sufficient consideration for an annual premi- 
um. The death may take place at any time, and the 
company must hold itself liable to pay the pohcy even 
at a great disadvantage to itself. 

A contract valid by the law of the place where it is 
made, is, generaDy speaking, vahd everywhere by the 
law of nations and by tacit consent. 

All contracts will be considered to be in force from 
the day of date, or the completion of the contract, un- 
less the contrary be proven. But the contract will be 
binding if the date is at variance with the deUvery. 
Since the payment of the first premium is always a 
condition precedent to the dehvery and obhgation of a 
life policy, it is this, rather than the date, which deter- 
mines when it begins to be in force, but when once in 
force it will take effect from the date by relation. 

An escrow is an obligation made by one party and de- 
livered to an agent or stranger to hold tiU certain con- 
ditions are performed, and then to be deUvered to the 
person for whom the obligation was made. A policy oi 
insurance made by the company, but stating that it is 
not binding till countersigned by an agent, is an es- 
crow, and the policy is not perfected till thus signed, 
and as long as it remains in the agent's hands it is not 
binding on the company, (although some recent de- 
cisions hold to a contrary doctrine, ) but if the policy ih 
dehvered to the policy-holder without the agent's siu- 



FOR LIFE AGEN2S. 155 

nature, the law considers that this condition has been 
waived, and in case of death th^ claim will have to be 
paid. Agents, therefore, should never sign policies re- 
maining iu their hands until the premium is actually 
paid. 

When a claim is made upon a contract in wiiting it 
is necessary that the party claiming under it should 
produce it, and no parol evidence will be of any avail to 
substantiate its terms. If the insured loses his policy, 
or if it is destroyed by fire, he should immediately state 
the fact to the company and obtain a duplicate, for, in 
case of death, it might otherwise be necessary to resort 
to a court of equity to enforce payment of the claim. 

It is a fundamental principle in law that parol evidence 
will not be taken to contradict, vary or explain a writ- 
ten contract, or to show it to be different from what it 
purports to be on the face of it, except in the single in- 
stance of latent ambiguity. When two parties have 
reduced a contract to writing, it is presumed to con- 
tain the whole of it, that the parties have deliberately 
weighed every word, and each sentence expresses its 
full meaning, and to admit parol evidence would de- 
stroy all the advantages of writing. Every agreement 
must receive its construction from its own terms with- 
out the intervention of any evidence foreign to it, un- 
less it be to explain the meaning of some words and 
how they are used in the business. It has been decid- 
ed that a policy of insurance must be interpreted ac- 
cording to the words of the poUcy, and cannot be va- 
ried by the words or promises of any pamphlets or cir- 
culars issued by the company. 

Contracts should bo construed so as to give effect to 
real intention of the parties so fejr as it can be ascer- 
tained. When parties make a contract they have a de- 
finite end in view, something which is to their mutual 
advantage, and it should be construed so that their real 
intention should prevaiL The construction should be 
reasonable without ambiguity, and the words are to be 
understood according to the meaning in which they are 
generally etnployed. Where there is no ambiguity in 
the language, none should be admitted in the explana- 
tion. Bad grammar or bad spelling does not vitiate a 
contract if the real inten-tion of the parties can be un- 
derstood. The construction should be made on the 
whole contract, and not on the separate parts. When 
the words are doubtful, the first thing to be inquiyed 
into is the intent of the parties, and if that intent is 
plain and manifest, such construction ought to be put 
upon them as will best answer the intention ; and if 



156 INSTRUCTION BOOR 

words bear two senses, they ought to be understood in 
the sense which is most agreeable to the nature of the 
contract, and anything ambiguous may bo explained by 
the common use of the terms of the Country where the 
contract was made. 

In interpreting contracts words should be taken most 
strongly against the grantor and in favor of the other 
party; thus in the construction of a life policy the mean- 
ing will be construed as favorably as possible toward the 
policy-holder, because the company writes the policy 
and is supposed to exercise aU due deliberation in it. It 
seems, too, that the courts are disposed to apply a 
similar rule to the application and to favor such a con- 
struction as will sustain the contract rather than one 
which would abrogate it. 

But this rule does not go so far as to authorize a con- 
struction against the promissor merely because that view 
is possible. On the contrary, in the absence of any- 
thing to show that the terms of such contract are in- 
tended to be understood in a particular or special sense, 
courts will go no further than to hold the promissor lia- 
ble to the extent which the other party had a right to 
understand from the terms of the instrument when 
viewed in their ordinary and <?ommonly-received accept- 
ation. 

A policy of insurance, like other contracts, should be 
construed according to the sense in which the parties 
are supposed to have understood it at the time it was 
entered into, and they will be presumed to have un- 
derstood it in the sense that men of ordinary intelli- 
gence ought to have understood it. 

Life Insurance not an Indemnity. 

An insurance upon life has but a remote resemblance 
to fire or marine insurance. In the latter the particu 
lar object is to indemnify against a pecuniary loss, the 
contract being to pay whatever is lost not exceeding a 
certain specified sum. But life insurance is a contract 
to pay a certain sum stated in the policy at the death of 
the policy-holder, or at a certain time which may or may 
not occasion a pecuniary loss. The policy-holder may 
be insane or totally incapacitated from all labor and 
usefulness, but this makes no difference, the money- 
value of the life is stated and agreed upon in the policy, 
and the company is bound for the whole amount. II 
any other rule were adopted, if the friends of the 
policy-holder were to receive only the sum which would 
compensate for the pecuniary loss they sustained, poll- 



FOR LIFE AGENTS. 157 

des would seldom be kept in force after the productive- 
ness of the insured began to decline. 

Payment of Premium. 

It may be said that it is a fundamental principle in 
life insurance that the premium must be paid in ad- 
vance, or the policy will lapse unless the payment Vt 
waived or deferred. The reason of this is very clearly 
stated in the following extract from a judicial decision : 

A policy of insurance is In one sense a one-sided contract. The 
payment of an annual premium insures the life for a year. Al 
the end of the year the comi^any is bound to receive the premium 
Lf tendered ; the insured is not bound to pay it. To continue the 
igreenient from year to year is at the option of the insured. The 
premiums are the fund rehed upon for tlie losses incurred. If the 
insured ceases to contribute to the fund, it must be presimied 
that he will not claim its benefit. The company must know at the 
stipulated day whether the agreement is to continue. The pay- 
ment of the premium advises them. If not paid at the time, ol 
necessity the company must conclude it never will be paid. They 
dare not calculate ou probabilities. No life insurance company 
Ran do business for a single year on any other principle. . To at- 
tempt it must be to forfeit the confidence of the people. Tho in- 
Burance is accepted on these terms. They form a part of the 
written contract upon which the claim for the benefit of it ie 
based. Clearly, the object of the provision is not merely to se- 
cure the payment of premium. It may prevent the payment oi 
premium when overdue, otherwise those interested might claim 
the sum insured, though the insured had died with his premium 
unpaid. The prompt and punctual payment of the premium is the 
very substance of the contract. — 2 Bigelow, Life and Ace. Rep., 150. 

No excuse or accident will be allowed to set aside this 
rule unless there is a stipulation in the policy, or unless 
there is a subsequent agreement to this effect. A pol- 
icy-holder going to the office of the company to pay his 
premium on the last day that it was due, was stricken 
down by paralysis and died the next day without hav- 
ing paid it. Meanwhile the company declared the pol- 
icy to be forfeited, and the court held that it would not 
have been held Hable for the claim, unless there had 
been a special stipulation to waive the payment a 
short time in case he was not able to pay it when 
due. 

A premium received by a company after the death of 
the insured and after the time of payment has expired, 
the company being ignorant of the death of the policy- 
holder, will not revive a policy. The premium is for 
the future insurance of the policy-holder while living, 
and after he dies it is too late to correct mistakes. 

Where a note was given for half a premium on a poJ 



158 INSTB UGTION BOOE 

icy where the premium was payable strictly in advance, 
and the note was not paid at maturity, it was held that 
the company was not liable when the insured died after 
the note became due. 

When a premium is payable by quarterly installments, 
the non-payment of one of the installments on the day 
it is due will cause the forfeiture of the policy. 

When the premium is paid subsequently to the date 
and issuance of the policy, the pohcy takes effect by 
relation from the time when the contract was made, 
though it is provided that the policy shall not be bind- 
ing till the premium is paid. 

The premium must be paid when it is due, and to 
some one authorized to receive it, otherwise the policy 
may be forfeited ; but if the premium is tendered to an 
authorized agent of the company before it is due, and 
he refuse to receive it, the policy will be binding al- 
though it is not paid. 

Delivery of Policy. 

The delivery of the policy is usually necessary to 
complete the contract. The application of itself is in- 
sufi&ient to this end until it has been accepted by the 
company, and such acceptance is generally signified by 
the execution and delivery of the policy. But this is 
not always essential. By agreement between the par- 
ties the contract may be complete, even in the absence 
of a written policy. On the other hand, the contract is 
not always necessarily consummated by delivery where 
this is merely conditional, and it appears that it was 
not the intention of the parties to consummate it. 
Thus the sending of the policy to the agent to counter- 
sign and deliver at his discretion, is not an uncondi- 
tional acceptance until delivered by the agent, and in 
case of death before such delivery it is void. 

Warranty and Representation. 

In order to form a contract of insurance intelligently, 
it is necessary for the company to have definite know- 
ledge of the physical condition of the person to be in- 
sured. The applicant for insurance makes certain state- 
ments respecting his health, physical condition, and 
former manner of life, and upon these statements the 
company decides whether to accept or to reject the ap- 
plication. These statements must be true, or else a 
fraud is committed, and the law decides that the person 
insured warrants them to be so. "A warranty in a 
policy of insurance is a condition or contingency, and 
unless it be performed, there is no contract. It is 



FOB LIFE AGENTS. IS^ 

styled a condition precedent, which means that ii is per* 
fectly immaterial for what purpose a warranty is intro- 
duced, and that no contract exists unless the warranty 
be literally complied with." 

A representation is a " verbal statement made by the 
assured to the company before the subscription to the 
policy as to the existence of some fact or state of facts 
Lending to induce the company more readily to insure 
the risk, by diminishing the estimate it wo-uld otherwise 
have formed of it." It belongs to some matter extrinsic 
to the contract, and generally, if not always, relates to 
the present condition of the subject insured. 

Concealment or misrepreseniation. The rule of law is 
that the insured, as well as the agent whom he employs 
to efifect the insurance, should give an unreserved and 
full statement of all the material facts, when called 
for and even when not called for, when their sup- 
pression would amount to a deliberate misrepresenta- 
tion of the risk. The law considers the insurance to 
be uudertaken without any definite knowledge of the 
results, and in order to form a proper estimate of 
the risk insured, and to compute accurately the com- 
pensation which ought to be paid, a knowledge of all 
important points is most essential to the company. 

These facts are almost invariably within the know- 
ledge of the insured, and a communication of them is 
most justly and wisely imposed as a positive duty on 
him by the law. He is required to act in the purest 
good faith, and his omission to mention any material 
iact which might influence the company in estimating 
the premium or accepting the insurance, although it 
may have arisen. from uiistake or heedlessness, may be 
fatal where the compauy is justified in assuming that 
all such facts have beeu told.* 

Thus if a party asking to be insured is in the habit of 
eating opium, the fact should be stated by him even 
though not specially asked by the company. 

Every agent and applicant should clearly und'erstand 
that in case of concealment or misrepresentation, as in 
case of warranty, the question of materiality is not reg- 
alated by the event, and that although death may arise 
from causes totally unconnected with the circumstances 
which have been omitted to be mentioned, or have been 
misveprcsentcnljthe contract willsometimes be vitiated, f 

But later authorities do not appear to be quite as 
str^jt, in that they require the misrepresentation to be 



* <ngell on Fire and Life Insurance, § 307. 
1 ibid., g 321. 



160 INS TE UUTION BOOR 

material to the risk, while iu warranty it is not so. Mr. 
Justice WelLi of Massachusotts says : 

" Bepresentations to insurers, before and at the time 
of making a contract, are a presentation of the elements 
upon which to estimate the risk proposed to be as- 
sured. If wrongly presented in any respect material to 
the risk, the policy that may be insured upon will not 
take efifect." 

And another authority holds that ♦• fraud is an ele- 
ment which vitiates every contract, and a want of truth 
in a representation is fatal or not to the insurance, as il 
happens to be material or not material to the risk un- 
dertaken; but when a thing is warranted to be of a par- 
ticular nature or description, it must be exactly as rep- 
resented, otherwise the policy is void and there is no 
contract ; and this may be considered as a first princi- 
ple in the law of insurance." 

But the mere omission of the insured to state matter 
Qot called for by any specific or general question, would 
not be a concealment and would not vitiate the policy . 
The presumption is that the company questions the 
party upon all subjects which it deems material, and be- 
yond that the party is not bound to disclose. 

Insurable Interest 

The party tor whose benefit a policy is written must 
have an intejrest in the life of the insured, that is, it 
must be shown that the death of the latter will be a 
damage, either pecuniary or otherwise, to the former. 
This is termed ** insurable interest," and it is necessary 
In order to hold the company liable. If this is wholly 
wanting, as where a man pays the premiums on the life 
of another who does not owe him anything and is not 
related to him, the contract of insurance is a wagering 
poUcy, a mere bet that he will die, and moreover, it is 
for the interest of the party paying the premiums that 
he should die, and instances have occurred in which 
means have been taken to hasten this event when lives 
were insured with wagering policies. By the laws of 
England and several of the States of the Union such 
policies are void. 

This insurable interest may or may not be a pecunia- 
ry one. It is a sufficient basis for a contract of life in- 
surance if in the ordinary course of events loss and dis- 
advantage will probably arise to the party in whose fa- 
vor the pohcy is written, from the death of 'the poi'ty 
insured ; and the amount of loss and disadvantage is 
held in law to be the sum insured. A hona-fide cred- 



FOR LIFE AGENTS. 161 

itor hus an insurable interest in his debtor's life to the 
amount of his debt, for that is a probability more or 
loss remote that the debtor would pay the debt if he 
lived. When a member of a firm promises to contrib- 
ute his labor and skill in an enterprise or business op- 
eration, the other partners who fiirnish the capital have 
an insm-able interest in his life, because if he sliould 
die, the business would suffer. A newspaper firm in 
New York held some very large policies on the life of 
its principal editor, and more than one prominent 
church has insured the lite of its pastor for the benefit of 
the society for a large amount. If a sister without pro- 
perty of her own, or means of support, depends upon 
her brother for a living, this dependence on him is suf- 
ficient to constitute an insurable interest. A wife al- 
ways has an insui'uble interest in the life of her hus- 
band, and may recover thereupon without other prool 
than that of the relation between them. She has a 
clear legal right to support and maintenance so long as 
she may live. So a father who is entitled to the earn- 
ings of his minor son has an insurable interest in his 
life. On this point Chief Justice Shaw of Massachu- 
setts says : 

" We cannot doubt that a parent has an interest in 
the life of a child, and vice versa a child in the life of a 
parent, not merely on the ground of a provision of law, 
that parents and grandparents, children aud grandchild- 
ren, are bound to support their lineal kindred when they 
may stand in need of reUef, but upon considerations of 
strong morals, and the force of natural affection between 
near kindred, operating often mere ef&caciously than 
those of positive law." 

•'Whatever may be the nature of such interest, and 
whatever the amount insured, it can work no injury to 
the insurers, (the company,) because the premium is 
proportioned to the amount, and whether the insurance 
be to a large or a small amount, the premium is com- 
puted to be a precise equivalent for the risk taken. Per- 
haps it would be difficult to lay down any general rule 
as to the nature and amount of interest the assured must 
have. One thing must be taken as settled, that every man 
has an interest in his own Hfe to dhy amount in which 
he chooses to value it, and may insure it accordingly. " 

If a wife has a pohcy on the life of her husband, the 
fact that they subsequently divorced will not invaUdate 
the policy. If there was an insurable interest at the 
time that the insurance was effected, the fact that it has 
ceased wiU not reUeve the company from liabihty. 

Waiver. Although the companies make certain con* 



162 INSTRUCTION BOOK 

ditions in their policies, and insert a clause that the po. 
licy will be forfeited if these conditions are not com- 
plied with, yet the company may waive any of these 
conditions when violated either directly by granting 
permission, or constructively by some act which the law 
will consider a waiver. A forfeiture for the non-pay- 
ment of premium when due, is waived by the subse- 
quent receipt of the premium without objection. If an 
agent delivers a policy without countersigning it, the 
company will be held responsible if the policy-holder 
dies, and the law will regard this requirement as being 
waived. The same is true respecting any other condi- 
tions of the policy, but the waiver m ist be clearly es- 
tablished by some act of the company or its agent, for 
it will not be implied. The law prefers to maintain the 
contract as originally written rather than to make a new 
one by the act of either party. Whether the acts were 
done which constitute waiver, are questions of fact for 
the jury to decide, but the sufficiency of these facts, or 
what amounts to waiver, are questions of law. 

If the agent waives the cash payment on a premium, 
and takes the individual note of the policy-holder in 
payment, although he does not deliver the policy, the 
insurance is complete, and the amount of the policy 
can be recovered the same as if the premium was paid 
in cash, and the policy delivered. But the note must 
be taken as payment, and not merely as a memorandum 
that the cash will be paid when the policy is delivered. 

Assignment. 

A life insurance policy may be assigned like any 
other contract iu the absence of any special statute to 
the contrary, provided there is sufficient insurable in- 
terest in the assignee to sustain it. Such an insurable 
interest is necessary, however, in many of the states, 
though in some no interest is required so long as the 
policy was valid at its inception. The olgect of the 
law is to defeat speculations in human life, and a dis- 
tinction has sometimes been drawn between a policy 
procured by the subject of insurance and by him made 
payable to another, and one subsequently assigned by 
the beneficiary. But in states where the principle is 
most rigidly enforced, no such distinction seems to be 
recognized, in these the rule in all cases seems to be 
that the beneficiary must have an adequate interest. 

A similar difference of views exists as to the effect of 
an absolute assignment where the interest of the bene- 
ficiary is less than the amount of the policy, as in 



FOB LIFE AGENTS. 163 

the case of a creditor or one purchasing the policy. 
According to the stricter rule the creditor is entitled 
only to his debt and advances made with interest no 
matter what the character of the transfer. According 
to the more liberal view an insurable interest at the 
inception of the assignment is enough to support an 
absolute transfer. 

As to the form of assignment any act on the part of 
the insured which sufficiently indicates his intention 
to transfer the interest is usually a valid assignment. 
There are three methods of assignment, by mere de- 
livery of the policy, by an endorsement on it, or by a 
separate deed of assignment, . But in all cases there 
should be a delivery either of the policy or deed, or 
some act on the part of the assi;jnor equivalent to such 
delivery as placing in the hands of a tlird party. 
A mere intention to transfer not accompanied by some 
act which is equivalent to an actual parting with the 
interest is not a valid assignment. 

When a policy is assigned, notice should be given 
immediately to the company, in order to prevent as- 
signees in bankruptcy or insolvency from acquiring 
rights which would impair or destroy the title of the 
assignee, and any third party taking a subsequent as- 
signment should likewise give notice. In case of a prior 
or subsequent assignment without notice, the diligent 
assignee by tim-ly notice to the company may acquire 
a superior title. In like manner possession of the 
policy is {in important matter in protecting the as- 
signee against an attempted transfer to othe] s. The 
form of notice to the company is immaterial so long as 
it clearly conveys the information. 

An assignment of a part interest may be invalid 
without the acquiescence of the company, at least 
without resorting to equity for its enforcement, since 
the compauj'^ is not obliged in law to respond to partial 
claimants. A valid assignment accepted in good faith 
will generally protect the assignee against subsequent 
claims of creditors. Wife's policies are protected by 
special statutes against assignment in most of the 
States, and no attempt should be made to assign 
them without a thorough knowledge of the law. 

Prospectus 

A prospectus, advertisement or leaflet setting forth 
the condition of the company, the terms of insurance 
or advantages, forms no part of the pohcy and is not 
binding upon the company. Such preHminary matter is 



164 mSTRUGTION BOOK 

never admitted where the terms of the contract are 
clear and expHcit. On this point Judge Selden of New 
York holds that ' ' there is not the sHghtest authority 
for holding that any preliminary or collateral writing 
whatever, which is neither annexed to nor referred to in the 
policy, can be taken as a part of the contract of insur- 
ance, and the general principles of law are opposed to 
any suT;h doctrine." 

The policy and the application must be considered 
as the entire contract between the two parti©*?, and all 
other statements used in persuading the insr -^d to take 
a policy, as well as the language and convr^^sation of 
the agent, is mere preliminary matter, which i • 'Mot bind- 
ing unless actually incorporated in the policj* 

Pollcy-holder not heard from. 

When a person insured has not been heard from for 
some time, the question arises whether he is alive or 
dead, and whether the company is liable for the amount 
of the poUcy without any further proof of his death. 
This is a question of fact which must be determined by 
the jury. All authorities agree that the common law is 
that the presumption of life With regard to persons ot 
whom no account can be given, ends at the expiration 
of seven years from the time they were last known to 
be living, and that after this period the burden of proof 
devolves upon the company insur.ng him. The circum- 
stances upon which the jury are to find the verdict are 
the age of the party, his situation, habits, employment, 
state of health, physical constitution, the place or cli- 
mate of the country, whether he went by sea or by land, 
the facility of communication between that country and 
his former home ; in short, any circumstances tending 
to aid in finding the fact of life or death. There must 
also be evidence that diligent inquiry has been made 
among his. relatives, or at the place of his foreign resi- 
dence, if known, to ascertain if he is Uving. 

The statutes of New York and Pennsylvania adopt 
the EngUsh rule, that when a person has been absent 
from home for seven years, without being heard of, and 
diligent inquiries have been made at his last known place 
of residence, without success, he shall be considered a& 
dead. 

Violation of Conditions. 

When a policy contains certain conditions, the viola- 
tion or non-performance of any of them may vitiate it. 



FOR LIFE AGENTS. 166 

A. person who had special permission to make a voy- 
age to California and return by way of Cape Horn or 
Vera Cruz, was said to have vitiated the policy because 
he returned by way of Chagres, although he arrived 
here safe and sound. The policy fixed the condition 
upon which it should be binding and upon which it 
should be annulled, and there having been a breach in 
the condition, it was thereby rendered void. So when 
the Protestant Episcopal bishop of Khode Island went 
into a Southern State, and remained ten days when the 
conditions of his policy only allowed him to remain 
five, it was held that the policy was forfeited. 

If a person having an insurance on his life commit 
a felony for which he is tried, convicted and executed, 
the poHcy is rendered void, although it contain no con- 
dition to this effect. It has been held that to pay a 
claim of this kind would be contrary to public policy 
and sound morals. 

Since the courts and pubUe opinion hold the com- 
panies strictly responsible to pay every just claim, no 
matter how much greater it may be than the premiums 
it has received, it is only j-ust and equitable that the 
policy-holder should be held to as strict an account for 
his conduct while he is insured. He holds possession 
of the policy, its contents can be read at any time, and 
hh&re is no excuse for his violatinsr them. 



Rights of Married "Women. 

Under the statutes of New York, Massachusetts, Con- 
necticut and some other States, a policy of insurance 
made on the life of the husband for the benefit of th« 
wife and her children in case of her death, could not 
formerly be transferred, so as to defeat their interest in 
it. The statutes evidently intend that provision should 
be made for her and her children in a state of widow- 
hood and orphanage, should such a condition occur, 
siuce this was the evident object of the husband when 
he took the poUcy. 

At common law a man could insure his life to any 
amount which the company was willing to receive 
and for which he would pay the annual premium, but 
subsequent statutes have been enacted that if one 
wished to insure the life of another, he could only in- 
sure to the interest he had in such other life. This 
principle the legislatures have relaxed in respect to in- 
surance effected by a married woman on the life of her 
husband for any sum which she and the insurance 
company see fit to contract for. It is also provided 



166 INSTR UGTION BOOK 

that in case of her surviving her husband, the amount 
payable in the terms of the policy should be payable to 
her, for her own use, free from all claims of the repre- 
sentatives of her husband or his creditors. In some 
States this is limited to the case where the annual pre- 
mium is not over $300. In these acts the contract is 
continued to the children of the assured wife after her 
death. This provision is a special and a peculiar one, 
and looks to a state of widowhood and for the orphan 
children, and it would be a violation of the spirit of 
the provision, to hold that a wife insured under this act 
could sell or traffic with her policy as though it was real- 
ized personal property or an ordinary security for money. 

In such a policy the intention is not to give a sum oi 
money to the children after the wife dies, but to make 
a life policy, in a certain event, payable to them, anrt 
the intention is not only expressed but executed. This 
is evidently the intention of the statute law, and it is 
against public policy to allow its provisions to be de- 
feated by any assignments or transfers to other parties, 
A life policy made in this manner is not testamentary 
in its nature and therefore revocable. It is not a will, 
but a contract in behalf of the wife and children, au- 
thorized and regulated by statute, and when once en- 
tered into, is no more revocable than a promissory note 
would be which was made payable to the children af- 
ter the death of the mother. 

The above doctrine however has been materially 
modified by more recent decisions and by statute in 
several of the States, and the validity of an assignment 
joined in by the wife has been recognised in so far as 
her interest is concerned, and especially as regards 
endowments. Attempts have been made to evade the 
law by a surrender or lapse of the policy and the accept- 
ance of a new one in its stead. But such evasions 
have not met witn favor in the courts. Where the 
company has been a party to the scheme, ''" e court 
has compelled the reinstatement of the original con- 
tract at the option of the wife, and in other cases has 
protected her rights in the substituted contract. 

Suicide. 

Hardly any subject has occasioned more litigation or 
been more frequently contested than the question whe- 
ther suicide or self-destruction will avoid the payment 
of the sum insured. Nearly every company has a spe- 
cial clause in its policies that it will not be liable "if 
the insured die by his own hand," but when the cases 
come before the courts and jury, the companies find 
decision after decision rendered against them. 



FOR LIFE AGENTS. 167 

Suicide is thus defined by Blackstone : *' Afelo de se 
is he that deliberately puts an end to his existence, or 
commits any unlawful, malicious act, the consequence 
of which is his own death. The party must be of years 
of discretion and in his senses, or else it is no crime. 
But this excuse ought not to be strained to that length 
that the very act of suicide is an evidence of insanity, 
as if every man who acts contrary to reason has no rea- 
son at all, for the same argument would prove every 
other criminal non compos as well as the self-murderer. 
The law very rationally judges that every melancholy or 
hypochondriac fit does not deprive a man of the capa- 
city of discerning right from wrong. If a real lunatio 
kills himself in a lucid interval, he is a. felo de se as 
much as another man." 

According to this definition, insanity at the time of 
self-destruction must be clearly proved and will not be 
presumed. If a man clearly understands the nature of 
his act and intends to take his life, the policy will be 
avoided, but if he is insane, and incapable of discern- 
ing between right and wrong, then the company will be 
liable to pay the amount of the policy. 

It has been decided that ' ' it never has been antici- 
pated by any law-writer known to us that the mere 
transports of passion at the time the fatal deed is done, 
where the mind remains unimpaired in the exercise ol 
its intellectual faculties, however violent and overwhelm- 
ing, shall exonerate even from criminal responsibility, 
much less to avoid civil contracts. The sanity of the 
suicide, like that of the homicide, is legally presumed, 
and the evidence of insanity must be sufficiently patent 
to overcome both this legal presumption and the evi- 
dence of sanity, to establish to the satisfaction of the 
jury insanity. — 6 Bush., 268, Kentucky. 

In another case it was decided that " there is no pre- 
sumption in law, prima facie or otherwise, that self-de- 
struction arises from insanity, and if, when a person is 
excited or angry, he takes his own life, because in the 
exercise of his reasoning faculties he preferred death to 
life, then the company is not liable, as he died by his 
own hand. — 1 DUlon, Kansas. 

Chief Justice Bigelow, in a leading discussion on this 
subject, decides that "the facts agreed by the parties 
concerning the mode by which the plaintiff's intestate 
took his own life, (cutting his throat with a razor,) 
leave no room for doubt that self-destruction was in- 
tended by him, he having sufficient capacity at the time 
to understand the nature of the act he was about to 
commit, and the consequences which would result from 



168 INSTB UGTION BOOK 

it. Such being the fact, it is wholly immaterial to the 
present case that he was impelled thereto by insanity, 
which impaired his sense of moral responsibility and 
rendered him to a certain extent irresponsible for his 
actions." — i Allen, 96 Mass. 

But on the other hand, the authorities are very clear 
that where the insured is insane at the time the act is 
committed, self-destruction will not avoid the policy as 
policies are usually written. The words of the proviso, as 
" suicide," " dying by one's own hand," " are the words 
not of the assured, but of the assurers, introduced by 
themselves for the purpose of their own exemption and 
protection from liability ; both in reason and good 
sense, therefore, no less than upon acknowledged prin- 
ciples of legal construction, they are to be taken most 
strongly against those that speak the words, and most 
favorably for the other party." If the company intend- 
ed that the policy should be voidable in case of self-de- 
struction while temporarily insane or under a fit of de- 
lirium, while the policy-bolder was unable to distin- 
guish right from wrong, or know the consequences of 
his act, the law presumes that the company would have 
so expressed it in the policy. It is as easy to make an 
exception of this nature as it is against death in a trop- 
ical country where the policy-holder is forbidden to tra- 
vel by the terms of the policy, or while engaged in min- 
ing or ascending in a balloon. The most recent scien- 
tific investigations disclose the fact that insanity is a 
disease of the brain. Microscopic examinations of the 
brains of healthy and insane persons show a consider- 
able difference in their cellular structure, and the ques- 
tion whether a person was really insane or not when he 
committed self-destruction may yet be solved by med- 
ical science. 

It follows, therefore, that the companies, as their po- 
licies are usually written, are liable for the amount oi 
the policy when the insured, in a fit of insanity, kills 
himself. On this point Chief Justice Nelson says : 
"Speaking legally, self-destruction by a fellow being 
bereft of reason can with no more propriety be ascribed 
to the act of his own hand than to the deadly instrument 
that may have been used for the purpose." 

'* Suicide involves the deliberate termination of one's 
existence while in the possession and enjoyment of his 
mental faculties. Self-slaughter by an insane man or a 
lunatic is not an act of suicide within the meaning ol 
the law ."—4 Hill, K Y. Rep., 73. 

The policies of some companies are so worded as to 
exclude the payment of claims when the insured dies 



FOR L IFF A GFS TS. 169 

by self-destructiou, whether "sane or insane," on this 
point it has been decided in the Supreme Court of Wis- 
consin, by Mr. Chief Justice Dixon, in a case where 
these words were used in the policy, that the parties 
agreed upon the definition and limitation of the word 
"suicide" by the conditions of the policy, and there- 
fore must be bound by that definition. Hence the pol- 
icy was null and void by violation of its conditions. * 
Attempts to defraud the companies through suicide 
are notorious. Cases have occun-ed where men have 
made careful inquiries as to what companies pay suicide 
claims, and after insuring in them to a large amount, 
they put an end to their own lives, relying on the com- 
panies and the courts to give their families the amount 
insured. But the payment of a claim where the pol- 
icy-holder committed suicide willfully and knowingly, 
is clearly against good morals and public po'.icy, and 
ought to be prohibited by statute law. 

-X- Ins. Law Journal, vol. iii., p. 422 See also on This subject 
of suicide, the following recent decisions. Blackstone vs. Ins. 
Co., xviii. Ins. L. J., 497; Mut. Ben. Life Ins. Co. vs. Daries, 
XA'iii. Ins. L. J., 269; Scarthrs. Mut. L. Society, xviii. Ins. L. J., 
568; Dennis vs. Ins. Co., xix. Ins. L. J., 852. 




Annual Premium per $1,000 Insurance. 



2 o 
SO 



<£ 




LIFE. 




ENDOWMENT MATURING. 


bi. 

--1 


Ordi- 


10 pay 


15 


20 


10 


15 


20 


25 


30 


35 


nary. 


ments 


py'ts. 


py'ts. 


j'-ears 


years 


years 


years 


years 


years 




.1 


$ 


$ 


$ 


95.65 


$ 


$ 


$ 


* 


$ 


25 


19.99 


38.58 


29.72 


25.55 


62.03 


45.50 


35.89 


29.83 


25.87 


80 


22.73 


42.80 


33.03 


28.45 


96.08 


62.55 


46.16 


36.74 


30.93 


27.27 


:^5 


26.21 


47.80 


36.98 


31.97 


96.63 


63.28 


47.14 


38.06 


32.63 


29.40 


40 


30.71 


53.77 


41.81 


36.35 


97.43 


64.46 


48.77 


+0.19 


35.33 


32.68 


45 


36.74 


61.15 


47.93 


42.04 


99.02 


66.63 


51.60 


43.77 


39.69 




50 


44.70 


70.05 


55.56 


49.37 


101.72 


70.19 


56.15 


49.37 






55 


55.14 


80.61 


65.09 


58.86 


105.89 


75.74 


63.17 








GO 


69.07 


93.51 


77.44 


71.63 


112.50 


84.47 











|25il9.8t 



2 -'.80 
26.60 
31.60 
38.10 
47.10 
59.40 
76.50 



45.30 
50.20 
56.10 
63.10 
71.80 
82.30 
94.90 

no.2o 



28.00 
31.20 
35.10 
40.00 
46.40 
54.80 
65.60 
80.70 



67.00i48. 
67.70148. 
68.70150. 
70.4052. 
73.4056. 
78.3062. 
85.9071. 
97.70!85. 



37. 30 1 30. 60 
38.40 32.00 
40.10 34.20 
42.90 37.70 
47.60 43.20 
54.80 51.60 
65.70 



26.40 
28.10 
30.80 
35.00 
41.30 






19.89 
22.70 
26.38 
31.30 
37.97 
47.18 
59.91 



42.56 
46.97 
52.40 
59.09 
67.37 
77.77 
90.79 
107.35 



32.34 
35.76 
40.01 
45.33 
52.11 
60.91 
72.50 
88.19 



27.39 
30.36 
34.08 
38.83 
45.03 
53.38 
64.82 



66.02 
66.77 
67.85 
69.49 
72.14 
76.59 
83.82 
95.50 



37.17 
38.16 
39.68 
42.10 
46.08 
52.60 
62.92 
78.80 



30.61 
31.78 
33.63 
36.59 
41.37 
48.96 
60.55 



26.33 
27.76 
30.00 
33.55 
39.10 
47.56 



^7 



25 


16.50 


35.53 


26.60 


30 


18.871 39.29 


29.50 


35 


21.98 44.02 


33.11 


40 


26.17 49.93 


37.68 


45 


31.92 


57.24 


43.48 


.>(» 


39.93 


66.38 


51.38 


55 


51.17 


78.85 


63.16 


60 


67.94 


94.08 


78.25 



22.62 
25.10 
28.27 
32.36 
37.67 
44.82 
54.40 



57.91 
58.23 
58.73 
59.60 
61.16 
64.02 
68.99 
77.38 



31.47 
32.00 
32.91 
34.50 
37.27 
42.04 



25.45 
26.16 
27.37 
29.44 
32.95 



. I 

is 

as 



■^2 



20.14 
22.85 
26.35 
30.94 
37.08 
45.45 
56.93 
72.83 
19.90 
22.70 
26.40 
31.30 
37.95 
47.20 
59.90 
77.65 



50.38 
54.65 
59.67 
65.60 
72.65 
81.19 
91.61 

104.66' 
42.55 
46.95 
52.40 
59.10 
67.35 
77.75 
90.80 

107.35 



36.68 
39.84 
43.60 
48.13 
53.71 
60.79 
70.02 
82.52 



29.98 
32.62 
35.82 
39 77 
44.82 
51.54 
60.79 



32.35 27.40 
35.75 30.35 
40.00 34.10 

45.35 38.85 
52.1045.05 
60.90 53.40 
72.50 64.80 
88.20180.90 



68.02 
68.36 
68.90 
69.81 
71.49 
74.54 
79.84 

88^3 

66.00 47, 
66.75 48, 
67.85 49 
69.50 51, 
72.1555 
76.60 60. 
83.8069, 
95.50l 



38.28 
38.85 
39.82 
41.52 
44.49 
49.60 



31.34 
32.10 
33.40 
35.64 
39.43 



26.72 
27.74 
29.45 
32.31 



37.15 
38.15 
39.70 
42.10 
46.10 
52.60 



30.60 
31.80 
33.65 
36.60 
41.35 



26.35 
27. 
30.00 
33.55 



Wo 



03 

rrcc 

17 



19.89 
23.02 
26.87 
31.73 
38.04 
46.42 
58,53 
76^2 
19.89^ 
22.70 
26.38 
31.30 
37.97 
47.18 
59 91 
77.63 
19.90 
22.70 
26.40 
31.30 
38.00 
47.00 
59.50 
77.00 



41.95 
46.51 
51.62 
57.44 
64.23 
72.31 
83.72 

101.52 
42.56 
46.97 
52.40 
59.09 
67.37 
77.77 
90.79 

107^35 
41.85 
46.72 
52.35 
58.85 
66.60 
76.38 
90.73 

107.35 



32.00 
35.60 
39.87 
45.12 
51.79 
59.97 
70.72 
84.58 



26.67 
29.88 
33.61 
37.78 
42.42 
49.20 
59.08 
78.57 



94 

95. 

96. 

97. 
100, 
103, 
108. 
116. 



43.34 
44.61 
46.24 
48.49 
51.85 
58.29 
68.11 



34.01 
35.49 
37.43 
40.17 
44.42 
51.52 



28.32 
30.04 
32.35 
34.92 
39.83 



24.73 
26.72 
28.90 
32.26 



32.34 
35.76 
40.01 
45.33 

52.11 
60.91 
72.50 
88.19 



27.39 
30.36 
34.08 
38.83 
45.03 
53.38 
64.82 
80.91 



47.68 
48.53 
49.79 
51.78 
55.04 
60.45 
69.24 
83.18 



37.17 
38.16 
39.68 
42.10 
46.08 
52.60 
62.92 
78.80 



30.61 
31.78 
33.63 
36.59 
41.37 
48.96 
60.55 



26.33 
27.76 
30.00 
33.55 
39.10 
47.56 



33.31 
37.11 

41.45 
46.52 
52.56 
60.48 
72.1:h 
88.00 



28.08 
31.37 
35.16 
39.63 
45.20 
52.80 
64.30 
80.50 



43.60 

44.45 
45.80 
48.05 
52.00 



34.40 
35.60 
37.40 
40.40 
45.30 



29.10 
30.60 
33.00 
36.70 
40.90 



30.80 
34.00 



1^ 



20.50 
23.30 

27.10 
32.20 
39.10 
48.50 
61.60 
79.90 



43.50 
48.00 
53.60 
60.40 
69.00 
79.60 
93.00 
110.10 



33.10 
36.60 
41.00 
46.50 
53.40 
62.50 
74.40 



28.10 
31.10 
35. UO 
39.80 
46.20 
54.80 



An2stjal Prejhum per $1,000 Insurance, [continued] 









LIFE. 




EXDOWMEXT MATUIilNG. 


Ordi- 


10 pay 


15 


20 


10 


15 


20 


25 


30 


35 


7.0 


uary. 


meuts 


py'ts 


py'ts 


years 


years 


years 


years 


years 


year.s 






S 


e 


% 


3 


.•^ 


% 


^ 


6 


a 


^ 




'25 


20.20 


42.43 


82.15 


27.19 


104.85 


66.80 


47.67 


87.15 


80.5! 


26.16 


CO 


80 


2H.H0 


47.07 


85.74 


80.80 


104.82 


66.89 


48.39 


88.08 


31.71 


27.68 


iii 


35 


27.10 


52.58 


40.08 


34.08 


105.44 


67.69 


49.47 


89.52 


33.58 


30.02 


S 1 


4U 


81.50 


59.17 


45.29 


38.82 


107.20 


89.83 


51.88 


42.21 


36.57 


33.66 


->^ 


45 


88.00 


67.32 


52.00 


45.08 


109.10 


72.29 


55.06 


46.22 


41.44 




50 


47.00 


77.18 


60.41 


53.12 


112.97 


76.92 


60.65 


52.55 






^ 


55 


59.40 


89.64 


71.84 


64.26 


119.15 


84.25 


68.69 








60 


70.40 


106.25 


87.24 


80.15 


126.88 


94.43 













25 


14.85 


34.29 


— ^ 


30 


17.00 


37.97 


«x 


85 


19.70 


42.52 




40 


28.45 


48.20 


ft I 


45 


28.45 


55.25 


S-g 50 


35.35 


64.09 


"^55 


44.90 


75.08 


f=5 


60 


58.25 


89.00 



25.72 
28.52 
32,01 
36.42 
42.04 
49.34 
58.90 
71.82 



21.80 
24.21 
27.25 
81.16 
36.29 
43.19 
52.80 
66.90 



92.23 
92.48 
92.88 
93.52 
94.66 
96.88 
100.64 
107.15 



57.54 
57.87 
58.40 
59.30 
60.93 
68.90 
69.07 
77.80; 



40.75 
41.18 
41.90 
48.13 
45.36 
49.29 
55.97 
66.95 



«(M 



j3 « 
4^ 



25 19.80 
80 22.70 
35 26.50 
40 31.50 
45 38.00 
5047.00 
55 '59.40 
60176.40 



42.45 32.80 
47.10 36.45 
52.60 40.85 
59.20 46.20 
67.85 53.05 
77.20 61.60 
85.95 72.40 
103.35 86.55 



27.30 
30.45 
34.25 
39.00 
45.20 
53.35 
64.05 
78.65 



105.20:65. 
105.65j66. 
106.30 67. 

107.20 68. 
109.0070. 
112.05174 
116.8081. 
124.30 1 



80 46.75 
35 47.45 
15 48.50 
45 50.25 
85 53.85 
80 58.35 
00 1 



35.85 
36.75 
38.15 
40-45 
44.80 



29.10 
30 25 
82.05 
34.90 



24.75 
26.20 
28.45 



19.63 
22.63 
26.49 
31.57 
38.46 
47.70 
60.04 
76.75 



42.43 
47.07 
52.58 
59.17 
67.32 
77.18 
88.93 
103.35 



27.30 
80.41 
34.21 
38.97 
45.21 
53.32 
64.01 
78.64 



103.08i65. 
103.56166. 
104.17167. 
105.05 68. 



106.82 
109.83 
114.48 
121.80 



78147.67 






3548.89 






1549.47 






46,51.29 






88154.42 






88 59.48 






00 







2 1 



20.50 
23.30 
27.10 
32.20 
39.10 
48.50 
61.60 
79.90 



43.50 
48.00 
53.60 
60.40 
69.00 
79.60 
93.00 
110.10 



33.10(28.10 
36.6031.10 
41.0035.00 
46.50'39.80 
53.40 46.20 
62.50 54.80 
74.40 66.60 
90.60 83.20 



67.40i48.70 
68.20(49.60 
69.30l50.9O 
71.00 58.00 
73.80 56.40 
78.40162.00 
85.90 71.10 
98.00l 





25 


19.89 


42.56 


32.84 


27.39 




ir: 


80 


22.70 


46.97 


85.76 


80.86 




f- 


35 


26.88 


52.40 


40.01 


84.08 






40 


31.80 


59.09 


45.88 


88.88 




•1 


45 


87.97 


67.37 


52. 1 1 


45.03 






50 


47.18 


77.77 


60.91 


58 38 




"p- 


55 


59.91 


90.79 


72.50 


64.82 






60 


77.68 


107.35 


88.19 


80.91 





66.02,47.68 
66.77 48.58 
67.8549.79 
69.49 51.78 
72.14 55.04 
76.5960.45 
83.82 69.24 
95.50I 



37.17 
38.16 
39.68 
42.10 
46.08 
52.60 
62.92 



30.61 
31.78 
33.63 
36.59 
41.37 
48.96 



26.33 
27.76 
30.00 
33.55 
39.10 



-g 



25:19.68 
30,22.64 
35! 26.54 
40 31.60 
45 38.44 
50 47.70 
55 60.05 
60176.90 
25119.18 
30:21.88 
85 25.44 
40 30.18 
45|36.61 
50'45.49 



42.43 
47.07 
52.58 
59.17 
67.32 
77.18 
88.93 
103.35 



.27127.28 
.88 30.42 
.19 34.20 
.47 39.00 
.20 45.20 
.65 53.32 
.29:64.00 
25 1 



41.38;31 
45.66 34 



50.92 
57.39 
65.41 
75.44 
88.00 
103.96 



26.52 
29.38 
32.97 
37.55 
43.53 
51.56 
62.57 
78.06 



65.11 
65.96 
67.11 
68.88 
71.89 
76.60 
83.77 
94.84 



46.82 
47.80 
49.21 
51.41 
55.06 
60.75 
69.41 



86.39 
37.55 
89.27 
41.97 
46.35 
53.09 



29.91 
31.31 
33.41 
36.66 
41.80 



62.68 
63.31 
64.23 
65.66 
68.01 
71.98 
78.54 
89.21 



45.10 
45.83 
46.93 
48.69 
51.62 
56.53 
64.63 



35.03 
35.89 
37.23 
39.42 
43.08 
49.08 



28.74 
29.78 
31.44 
34.13 
38.52 



24.64 
25.92 
27.96 
31.22 



■S I 



= I 



60 



19.60 
22.36 
26.00 
30,84 
37.42 
46.50 
59.06 
76^52 
19.89J 
22.70 
26.38 
31.30 
37.97 
47.18 
59.91 
77.63 



42.37 
46.83 
52.28 
58.94 
67.38 
77.83 
90.80 
107.09 
42.56 
46.97 
52.40 
59.09 
67.37 

90.79 
107.35 



27.31 
30.27 
33.97 
88.65 
44.73 
52.86 
64.00 

i^ra 

34 27.39 
76 30.46 
01 34.08 
33 38.88 
11 45.03 
91 53.38 
50 64.82 
19 80.91 



103. 
104. 
105. 
106, 
108. 
112. 
118. 
12J7. 
i03. 
104. 
105. 
106. 
109 
112 
118 
127. 



65.30 
66.43 
67.80 
69.63 
72.29 
76.53 
83.42 
94.60 



47.46,36.63 
44.48l37.67 
49.87139.18 
51.85 41.56 
55.00 45.41 
60.2051.77 
68.7662.06 
82.60 



30.08 
31.27 
33.09 
36.00 
40.75 



26.10 
27.52 
29.81 
33.40 



66.02 
66.77 
67.85 
69.49 
72.14 
76.59 
83.82 
95.50 



47.68 
48.53 
49.79 
51.78 
55.04 
60.45 



37.17' 
38.16 
39.681 
42.10: 
46.08 
52.60i 



30.61126.33 
31.78 27.76 
33.63 80.00 
36.59 33.55 
41. 



Annual Premium pek $1,000 Insurance, [continued] 



<c 6 
EO 

;^ o 







LIFE. 




ENDOWMENT MATURING. 




Ordi- 
nary. 


10 pay 
ments 


15 

py'ts 


20 

py'ts 


10 
years 


15 
years 


20 
years 


25 
years 


30 

years 


35 

years 


25 
30 
35 
40 

45 
50 
55 
60 


$ 

20.50 

23.30 

27.10 

32.20 

39.10 

48.50 

61.60 

79.90 


43.50 
48 00 
53.60 
60.40 
69.00 
79.60 
93.00 
110.10 


33.10 
36.60 
41.00 
46.50 
53.40 
62.50 
74.40 
90.60 


28.10 
31.10 
35.00 
39.80 
46.20 
54.80 
66.60 
83.20 


$ 


67.40 
68.20 
69.30 
71.00 
73.80 
78.40 
85.90 
98.00 


48.70 
49.60 
50.90 
53.00 
56.40 
62.00 
71.10 
85.50 


38.00 
39.10 
40.60 
43.20 
47.30 
54.00 
64.70 


31.40 
32.60 
34.50 
37.60 
42.50 
50.30 


$ 



^^ 



19.80 
22.70 
26.50 
31.50 
38.00 
47.00 
59.40 
76.40 



42.45 
47.10 
52.60 
59.20 
67.35 
77.20 
88.95 
103.35 



32.05 
35.45 
39.65 
44.90 
51.55 
60.25 
71.65 
87.10 



103.91 
104.58 
105.53 
106.90 
109.07 
112.68 
118.54 
127.96 



66.02 
66.77 
67.85 
69.49 
72.14 
76.59 
83.82 
95.50 



47.68 
48.53 
49.79 
51.78 
55.04 
60.45 
69.24 
83.18 



37.17 
38.16 
39.68 
42.10 
46.08 
52.60 
62.92 
78.80 






19.80 
22.70 
26.50 
31.50 
38.00 
47.00 
59.40 
76.40 



32.80 
36.45 
40.85 
46.20 
53.05 
61.60 
72.40 



65.80 
66.35 
67.15 
68.45 
70.85 
74.80 
81.00 



46.75 
47.45 
48.50 
50.25 
53.35 



35.85 
36.75 
38.15 
40.45 
44.30 



29.10 
30.25 
32.05 
34.90 
39.55 



«^^ 

^z 



20.50 
23.30 
27.10 
32.20 
39.10 
48.50 
61.60 
79.90 



33.10 28. 
36.60 31. 
41.00 35. 
46.50 39. 
53.40 46, 
62.50 54. 
74.40 66, 
90.60 83. 



60 
•5f Non-forfeiting free tontine rates. 



105.90 
106.60 
107.60 
109.10 
111.30 
115.10 
121.20 
131.00 



67.40 
68.20 
69.30 
71.00 
73.80 
78.40 
85.90 
98.00 



48.70 38.00 
49.6039.10 
50.90 40.60 
53.00 43.20 
56.40 47.30 
62.00 54.00 
71.10 64.70 
85.5081.00 



31.40 
32.60 
34.50 
37.60 
42.50 
50.30 
62.30 



^ 


25 


SCO 


30 


^rr 


35 




40 


i 1 


45 


t^ 


50 


i^ 


55 
60 1 



19.63 
22.63 
26.49 
31.57 
38.46 
47.70 
60.04 
76.75 



31.87 
35.53 
39.94 
45.39 
52.39 
61.24 
72.48 
87.29 



100.63 
101.45 
102.51 
104.01 
106.54 
110.56 
116.53 
125.64 



63.84 
64.76 
65.99 
67.85 
70.95 
75.80 
83.11 



46.07 
47.10 
48.58 
50.87 
54.60 
60.39 



35.91 
37.13 
38.92 
41.68 
46.13 



29.63 
31.07 
33.21 
36.52 



19.89 
22.70 
26.38 
31.30 
37.97 
47.18 
59.91 
77.63 



42. 
46, 
52. 
59, 
67. 
77. 
90. 
107. 



32.34 
35.76 
40.01 
45.33 
52.11 
60.91 
72.50 
88.19 



103.91 
104.58 
105.53 
106.90 
109.07 
112.68 
118.54 
127.96 



66.02 
66.77 
67.85 
69.49 
72.14 
76.59 
83.82 
95.50 



47.68 
48.53 
49.79 
51.78 
55.04 
60.45 
69.24 



37.17 
38.16 
39.68 
42.10 
46.08 
52.60 



30.61 
31.78 
33.63 
36.59 
41.37 



25 


19.85 


42.43 


30 


22.90 


47.07 


35 


26.S0 


52.58 


40 


31.95 


59.17 


45 


38.95 


67.32 


50 


48.30 


77.18 


55 


60.80 


88.93 


60 


77.70 


103.35 



32.47 
36.18 
40.66 
46.18 
53.27 
62.23 
73.58 
88.55 



103.19 
103.99 
105.02 
106.46 
108.97 
112.95 
118.89 
128.00 



65.35 
66.24 
67.44 
69.28 
72.36 
77.20 
84.52 



47.07 
48.09 
49.54 
51.81 
55.54 
61.35 



36.63 
37.83 
39.61 
42.37 
46.83 



30.16 
31.59 
33.74 
37.05 



.^ I 



19.14 
22.06 
25.83 
30.78 
37.50 
46.51 
58.53 
74.82 



31.20 
34.78 
39.09 
44.41 
51.23 
59.86 
70.80 
85.22 



98.98 
99.77 
100.76 
102.17 
104.61 
108.48 
114.22 
123.02 



62.72 
63.59 
64.76 
66.54 
69.54 
74.21 
81.27 
92.17 



45.20 
46.19 
47.60 
49.80 
53.41 
59.02 
67.52 
80.45 



35.19 
36.36 
38.08 
40.75 
45.06 
51.68 
61.56 



28.99 
30.39 
32.45 
35.66 
40.70 
48.29 



fc-c^; 



14.75 
16.90 
19.70 
23.45 
28.60 
35.75 
49.75 



25.65 
28.40 
31.90 
36.30 
41.90 
49.20 
58.70 
71.55 



94.37 
94.63 
95.04 
95.69 
96.86 
99.10 
102.98 
109.63 



58.36 
58.70 
59.24 
60.15 
61.79 
64.81 
70.06 
77.75 



41.03 
41.47 
42.18 
43.42 
45.66 
49.62 
56.35 
67.36 



31.19 
31.75 
32.71 
34.39 
37.29 
42.31 
50.50 



25.09 
25.84 
27.11 
29.28 
32.95 
38.97 






19.80 
22.70 
26.50 
31.50 
38.00 
47.00 
59.40 
76.40 



32.06 
35.50 
39.60 
44.74 
50.80 
58.91 
69.52 
83.98 



90.90 
100.30 
100.90 
102.14 
103.58 
106.45 
111.58 
120.20 



62.70 
63.34 
64.20 
65.67 
67.70 
71.75 
78.26 
89.10 



44.82 
45.63 
46.70 
48.64 
51.45 
56.55 
64.65 
77.60 



34.67 

35.74 
37.00 
39.46 
43.05 
49.30 



28.38 
29.58 
31.44 
34.47 
38.85 



Annual Premium per $1,000 Insurance, [continued] 



aS 


6 


S? 


< 






^■o 


25 


IS 


30 
35 


02 1 


40 


>>' 


45 
50 


fi^y, 


00 




60 



Ordi- 10 pay 15 20 
uary. meut.- py'ts py'ts 



44.62 34.34'29.75 
48.80 37.5S 32 



54.00 
60.57 
69.15 
80.65 
96.23 



117.69 102.15 



41.73 36.55 



47.33 
54.80 
65.49 
80.6 



41.94 
49.60 
60.68 
76.41 
98.02 



EXDOW^NIEXT MATURING. 



10 15 20 25 30 35 
rears years years years years years 



125.64 



71.84 
72.66 
74.00 
76.37 
80.58 
87.84 
99.70 



S 

52.13 

53.09 

54.73 

57.59 

62.44 

70.44 

82.76 



^^ 



liso 



® aj 



25119.63 
3022.63 
35 26.49 
40!31.57 
45|38.46 
50147.70 
55 60.03 
60I76.74 
19.65 
22.65 
26.50 
31.60 
38.45 
47.70 
60.05 



42.05,31 



60 



to. 10 



46.76 
52.38 
59.17 
67.64 
78.00 
90.50 

106^6 
42.45 
47.10 
52.60 
59.15 
67.35 
77.20 
88.95 

103.35 



■X- Life rare endo-mneut 
25 15.97 
18.25 
21.28 
25.35 
30.93 
38.66 
49.42 
64.43 



26.95 
30.12 
34.01 
38.92 
45.3.S 
53.82 
64.95 
_80^16 
80127.30 
.45 30.40 
.80134.20 
.20 39.00 
.00145.20 
60153.35 
40l64.00 
.60178.65 



100.63 
101.45 
102.52 
104.00 
106.54 
110.56 
116.53 
125.64 
105.20 
105.70 
106.30 
107.20 
109.00 
112.10 
116.80 
124.35 



63.84 46.07 35.92 29.63 
64.76 47.11 37.13 31.07 
65.98 48. 58j3S.92, 33.21 
67.84 50.87 41.69136.52 
70.96 54.60 46.13 
75.80 60.39 
83.111 



s ternunatiii.i? at 



65.80|46.75 35.85 29.10 
66.35 47.45 36.75 30.25 
67.15 48.50 38.15 32.05 
68.45 50.30 40.45 34.90 
70.90 53.35 44.30 39.55 
74.85158.35 
81.001 
I 
ages rapging from 75 to 81. 



CO 

roc 
"^7 



6-5 



34.34 
38.02 
42.58 
48.27 
55.32 
64.18 
75.19 
89.03 



•X- Life Department, 



74121.83 
54124.24 
04I27.29 
45:31.21 
08:36.34 
3843.25 
95152.87 
84 66.94 



92.31 
92.57 
92.96 
93.60 
94.75 
96.92 
100.73 
107.25 



57.59 
57.93 
58.45 
59.35 
60.98 
63.97 
69.13 
77.86 



40.77 
41.20 
41.91 
43.14 
45.37 
49.31 
56.00 



30.98 
31.54 
32.49 
34.16 
37.06 
42.03 



25.19 
25.94 
27.21 
29.39 
33.09 



22.52 
24.20 
26.96 






25 19.89 


42.56 


32.34 


30122.70 


46.97 


36.76 


35 26.38 


52.40 


40.01 


4031.30 


59.09 


45.33 


45 37.97 


67.37 


52.11 


5047.18 


77.77 


60.91 


55-59.91 


90.79 


72.50 


I6OI77.63 


107.35 


88.19 



27.39 
30.36 
34.08 
38.83 
45.03 
53.38 
64.82 
80.91 



103.91 
104.58 
105.53 
106.90 
109.07 
112.68 
118.54 
127.96 



47.68 
48.53 
49.79 
51.78 
55.04 
60.45 
69.24 



37.17 
38.16 
39.68 
42.10 
46.08 
52.60 



30.61 26.33 
31.78 27.76 
33.63 30.00 
36.59 33.55 
41. 



uS 



25|20.50 
30 23.30 
35 '27. 10 
40132.20 
45:39.10 
50'48.50 
55 61.60 
60 79.90 



43.50 

48.00 

53.60 

60.40 

69.00 

79.60 6- 

93.0074 

iio.ioi 



28.10 
31.10 
35.00 
39.80 
40 1 4 6. 20 
50 54.80 
40 



48.70 
49.60 
50.90 
53.00 
56.40 
62.00 






25 19.89 
30,22.70 
35 26.38 
40 31.30 
45:37.97 
50147.18 
55159.91 
60177.63 



42.56 
46.97 
52.40 
59.09 
67.37 
77.77 
90.79 
107.35 



52.34 



27.39 
30.36 
34.08 
38.83 
45.03 
53.38 
64.82 
80.91 



103.91 
104.58 
105.53 
106.90 
109.07 
112.68 
118.54 
127.96 



66.02 47. 
66.77 48. 
67.85 49. 

69.49 51. 
72.14 55, 
76.59 60. 
83.82 69 

95.50 83 



68 37.17 
53 38.16 
79 39.68 
78,42.10 
04 46.08 
45 52.60 
24162.92 
,18i78.80: 



30.61 26.33 
31.78 27.76 
33.63 30.00 
36. .59 33.55 
41.37 39.10 
48.96 47.56 
60.55: 



15119.89 
30 22.70 
35126.38: 
40 31.30 
45 37.97 
50 47.18 
55,59.91 
60177.63 



42.56|32 
46.97 35. 
52.4040. 
59.09 45 
67.37 52 
77.77 60 
90.79,72 
107.35188 



2:7.39 
30.36 
34.08 
38.X3 
45.03 
53.38 
64.82 
80.91 



103.91 
104.58 
105.53 
106.90 
109.07 
112.68 
118.54 
127.96 



66.02|47 

at: TT 1 Q 



66.77 
67.85 
69.49 
72.14 
76.59 
83.82 
95.50 



,68|37.17| 
,5338.16! 
79139.68 
,78142.10 
,04 '46.08 
.45 52.60] 
,.24| I 



30.61 
31.78 
33.63 
36.59 
41.37 



26.33 
27.76 
30.00 
33.55 



Tt2 



'7> 



25 1 20. 50 
30123.30 
35127.10 
4032. 20 
45:39.10 
5()U>!.50 
55161.60 
60 1 79.90 



43.50133. 
48.0036 
53.60 41 
60.4046, 
69.00 53 
79.60 62 
93.00 74 
110.10 90 



28.10 
31.10 
35.00 
39.80 
46.20 
54.80 



40; 66.60 
6083.20 



103.91 
104.58 
105.53 
106.90 
109.07 
112.68 
118.54 
127.96 



66.02 
66.77 
67.85 
69.49 
72.14 
76.59 
83.82 
95.50 



37. 17|30.61, 26.33 



38.16 
39.68 
42.10 
46.08 



31.78 
33.63 
36.59 

41.37 
52. 60(48.96 47.06 
62.92160.55 
78.80I I 



27.76 
30.00 
^3.55 
^9.10 



CATALOGUE 

— OF— 

INSURANCE BOOKS 

— BY — 

C. C. HINE, PUBLISHER. 

Office of the Insurance Monitok, the Insurance Law 

Journal, and Hine's Daily Fire Record, 

137 Broadway, N. Y. 



Copies of the following works will be forwarded by mail, 
postage prepaid, on receipt of the price. Remit only by Check, 
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accompanied by the money will be filled C. O. D., express charges 
paid by purchaser. 

There is not an Insurance Agent in the United States who 
would not be the better prepared to make money and repute for 
himself, and to give satisfaction to his, companies, if he owned and 
-studied a well-selected insurance library. 

Money spent m insurance books is money well spent. 



Publications of the Ins. Monitor Office. 

The Insurance Monitor. A monthly magazine devoted to 
Insurance. Established in 1853. The oldest Insurance 
Journal in America. Quarto form, 9x12. Subscription 

price, per annum, postage prepaid $3 00 

Single numbers, each 25 

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each , 4 00 

The Insurance Law Journal. A monthly publication estab- 
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Back volumes since 1871, forming a complete library of 
Insurance Law, 960 pages each, law sheep, are for sale. 
Price per volume 6 50 

Any person ordering the whole set at once, will get a 
discount of one dollar per volume. 

An Ii'struotion Book for Life Insurance Agents, Canvassers, 

and Solicitors. By r^. Willev, Actuary. Single copies.. 1 50 
Per dozen 15 00 

Agents' Monetary Life and Valuation Tables. By D. Parks 
Fackler, Actuary. An invaluable work for Life Agents. 
Per dozen 15 00 | Single copies 1 50 



Memorandii for Life Airenls. A pamphlet collation, by John 
Wright, Esq., of Rothsay, Scotland, of briet, )'ithy, valu- 
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succeed as a I ife Canvasser. American edition revised by 
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Large orders, special figures. Single copies 10 

Law of Assiariinieiits of Life Policies. By Hine& Nichols. 
The Assignment of Life Policies has been the subject of 
much recent litigation, so that the standard text-books, 
issu«donly a few years since, are wholly incomplete in re- 
gard to it. This work brings the law down to a recent 
date. Cloth , 2 50 

Mortality Experience of American Missionaries. By N. 

WiLLEY. Pamphlet 50 

Suicide and Intemperance. By W. D. Shrady, LL. B. Pam- 
phlet 25 

Life Asrent's Aid. By Hevry W. Smith. An Inquiry 
into the Sources of Surplus : an Explanation of the Con- 
tribution Plan of Making Dividends. 48 pp., lamo. tinted 
paper. Paper covers 25 

Other Standard Works. 

The Law of Life Insurance. Life and Accident Insur- 
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bar, with notes to leading English cases, and numerous 
references. 5 vols., 800 pages, royal octavo. Law sheep. 
Per volume 6 50 

Sharpstein's Digest of Life and Accident Cases. A full 
compendium of the American and British Life and Accident 
Ins. Cases. 290 pages. Law sheep 3 00 

Bliss on tlie Law of Life Insurance, with Chapters on 
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Lav/ sheep ... 6 50 

Three Systems of Life Insurance. By Mervin Tabor, 
Actuary Illinois Insurance Department. Valuable alike 
to policy-holders and policy-seekers, and indispensable 
to the Life Insurance Solicitor. Cloth ; 240 pp 2 00 

Crawley's Life and Accident Insurance. The Law of Life 
Insuiance, with a chapter on Accident Insiu^ance. By 
Charles Crawley, London. 350 pp. Cloth 3 00 

Systems and Tables of Life Insurance. By Levi W. Meech, 
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